On $1/1/$x$4,$ TrueJet Airlines and Supplier Co$.$ signed a purchase agreement whereby TrueJet agreed to purchase $20,000$ gallons of jet fuel from Supplier Co$.$ for $$4\mathrm{.}90$ per gallon on $12/31/$x$6.$ The contract stipulates that, at settlement on $12/31/$x$6,$ TrueJet can choose to accept settlement in cash of the difference between the then$-$current market price and the contract price for the jet fuel, or TrueJet can accept physical delivery of the jet fuel. At the time the contract was signed, jet fuel was selling for $$4\mathrm{.}10$ per gallon. On $12/31/$x$4,$ jet fuel was selling for $$5\mathrm{.}05$ per gallon. As of $12/31/$x$5,$ jet fuel was selling for $$4\mathrm{.}85$ per gallon.

Required:

What entries should TrueJet record as of:

$1-$ contract inception?

$2-$ then at $12/31/$x$4?$

$3-$ then at $12/31$x$5?$

Answer rating: 100% (QA)

1 Contract Inception At contract inception Truejet should record the following entries a Accounts Payable Truejet should record an increase in the acc... View the full answer