Question: Best Corp., a public company using IFRS, signed a long-term non-cancellable purchase commitment with a major supplier to purchase raw materials at an annual cost

Best Corp., a public company using IFRS, signed a long-term non-cancellable purchase commitment with a major supplier to purchase raw materials at an annual cost of $1 million. At December 31, 2019, the raw materials to be purchased in 2020 have a market price of $950,000.

a. Prepare any December 31, 2019 entry that is needed.

b. In 2020, Best receives the raw materials and pays the required $1 million. The raw materials now have a market value of $920,000. Prepare the entry to record the purchase.

c. Explain how the accounting treatment under part (a) compares with the accounting treatment for private companies under ASPE.

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