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What entries should airline inc. record as of contract

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On 1/1/X1, Airline Inc. signed a purchase agreement to purchase 10,000 gallons of jet fuel from Seller Co. for $5.20 per gallon on 1/1/X3. The contract stipulates that, at settlement on 12/31/X3, Airline Inc. can choose to either accept physical delivery of the jet fuel or can accept settlement in cash of the difference between the then-current market price and the contract price for the jet fuel. At the time the contract was signed, jet fuel was selling for $5.15 per gallon. On 12/31/X1, jet fuel was selling for $5.25 per gallon. As of 12/31/X2, jet fuel was selling for $5.30 per gallon.

Problem 1: What entries should Airline Inc. record as of 1) contract inception, 2) then at 12/31/X1, 3) then at 12/31/X2?

Reference no: EM132694734

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