A furniture company enters into a non-cancellable purchase contract with a supplier on 1 November 20X5. The contract requires the company purchase 480,000 meters of fabric at $0.60 per meter in 20X6. At the end of 20X5, the replacement cost for fabric is $0.45 per meter. The company is required to fulfil the contract, and cannot cancel.

Prepare the journal entry to record the onerous contract.

Answer rating: 100% (QA)

Step 1 Calculate the loss on the onerous contract Loss on onerous contract Contract pr... View the full answer