Intermediate Accounting Inventories - Show Complete Solution and Explain:

Question 38

Big Company engaged into a commitment on October 15, 2021 to purchase 200,000 units of raw material A for P8,000,000 on Feb. 14, 2022. Big Co. engaged into this purchase to safeguard itself against the volatility of raw material A's pricing. The purchase price of material A had dropped to P36 per unit as of Dec. 31, 2021. However, by the time Big Co. took delivery of the 200,000 units on Feb. 14, 2022, the price of the material had increased to P41 per unit.

On Feb. 14, 2022, how much will be recognized as gain on purchase commitment?

Question 39

Green Manufacturing started the business 5 yrs ago. A fire broke out at the warehouse on September 11, 2021, destroying all inventories as well as numerous accounting records pertaining to the inventory. The information that is currently available is shown below. All sales and purchases are on account.

Jan. 1, Sept. 11, 2021 2021 Inventory P 489,123 Accounts receivable 289,435 P298,061 Accounts payable 159,682 147,910 Collections on accounts receivable, Jan. 1 - Sept. 11 634,231 Payments to suppliers, Jan. 1 - Sept. 11 390,123 Goods out on consignment at Sept. 11, at Cost 67,474 Summary of previous years' sales: 2018 2019 2020 Sales P534,230 P690,420 P701,243 Gross profit 160,269 179,509 238,423