Accounting for Inventory Transactions with Purchase Commitments

In Year $1,$ Moss Company signed a contract with a supplier to purchase $84,000$ subassemblies at $$30$ each during Year $2.$ When the contract was signed, the

contract price was less than the net realizable value of the inventory. The company uses the FIFO method to account for inventory. Assume Moss Company uses

a periodic inventory system.

Required

a$.$ The cost of subassemblies has declined, and the estimated net realizable value is now $$2,380,000$ on December $31$ of Year $1.$ Prepare any year$-$end entry

required for this cost decline.

b$.$ The subassemblies are received in Year $2$ when the net realizable value is estimated at $$2,380,000.$ The contract was paid in full in cash. Prepare the required

purchase entry in Year $2.$