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How much will be recognized as gain on purchase

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Big Company engaged into a commitment on October 15, 2021 to purchase 200,000 units of raw material A for P8,000,000 on Feb. 14, 2022. Big Co. engaged into this purchase to safeguard itself against the volatility of raw material A's pricing. The purchase price of material A had dropped to P36 per unit as of Dec. 31, 2021. However, by the time Big Co. took delivery of the 200,000 units on Feb. 14, 2022, the price of the material had increased to P41 per unit.

Problem 1: On Feb. 14, 2022, how much will be recognized as gain on purchase commitment?

Reference no: EM132969923

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