On November 17, 2002, Chaldees Airways entered into a commitment to purchase 3,000 barrels of aviation fuel for \($165,000\) on March 23, 2003. Chaldees entered into this purchase commitment to protect itself against the volatility in the aviation fuel market. By December 31, the purchase price of aviation fuel had fallen to \($40\) per barrel. However, by March 23, 2003, when Chaldees took deUvery of the 3,000 barrels, the price of aviation fuel had risen to \($60\) per barrel.

Instructions:

1. Make the journal entry necessary on November 17, 2002, to record the purchase commitment.

2. Make any adjusting entry necessary on December 31, 2002.

3. What type of account (i.e., asset, liability, revenue, etc.) is "Estimated Loss on Purchase Commitments"?

4. Make the journal entry to record the purchase on March 23, 2003. Chaldees uses a periodic inventory system.