Recording Inventory Entries with Purchase Commitments on Reporting and Purchase Dates

November 1, 2020, 5M Corporation entered into a purchase contract (not subject to revision or cancellation) to purchase 400 units of inventory for $50 per unit before January 1, 2021. The company uses LIFO inventory method.

a. If the inventory has a market price of $40 per unit on November 30, 2020, what entry (if any) does 5M Corporation record?

b. Record the purchase of 400 units on December 15, 2020, if the market price remained at $40 per unit. Assume that the company uses a perpetual inventory system.

Account Name		Dr.	Cr.
a.	AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A	Answer	Answer
	AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A	Answer	Answer
b.	Inventory	Answer	Answer
	AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A	Answer	Answer
	AnswerCashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A	Answer	Answer