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PROBLEM NO. 3 - Purchase commitment On November 17, 2010, Bautista Airways entered into a noncancelable commitment to purchase 3,000 barrels of aviation fuel for P9,000,000 on March 31, 2011. Bautista entered into this purchase commitment to protect itself against the volatility in the aviation fuel market. By December 31, 2010, the purchase price of aviation fuel had fallen to P2,200 per barrel. However, by March 31, 2011, when Bautista took delivery of the 3,000 barrels, the price of aviation fuel had risen to P3,100 per barrel. QUESTIONS: Based on the above and the result of your audit, answer the following: 1. The loss on purchase commitment on December 31, 2010 is a. P1,500,000 c. P2,400,000 b. P 900,000 d. P 0 2. The gain on purchase commitment on March 31, 2011 is A. P2,700,000 c. P2,400,000 b. P 300,000 d. P 0