Reference no: EM132903348

Brenalyn Co. entered into a purchase agreement on March 31,2021, to purchase raw materials. These materials are to be delivered on April 30,2022. The company did not actually put these materials into production until June 30,2022.

The contract price and the market prices for these materials are shown below:

Contract price,3/31/2021 ?1,200,000
Market price,12/31/2021 1,000,000
Market price,04/30/2022 1,400,000
Market price,6/30/2022 1,600,000

Problem 1: How much is to be recognized as loss on purchase commitment on December 31,2021?

a. Nil
b. ?200,000
c. ?400,000
d. ?600,000

Problem 2: On April 30,2022, time of delivery, the company should record the raw materials at

a. ?1,200,000
b. ?1,000,000
c. ?1,400,000
d. ?1,600,000