Intormedate AcoountngACC22051 PART B PROBMEMS 80 Marks Quest

Intormedate Acoountng(ACC22051 PART B: PROBMEMS (80 Marks) Question 1-(15 marks) a) Ankle Inc. signed a long-term non-cancellable purchase commitment with one of its Fina Exam suppliers to purchase material at an annual cost of $4,000.000. At December 31, 2016 the material to be purchased in 2017 has a market price of $3,500,000. Ankle is a public company Instructions Prepare the Dec. 31, 2016 journal entry assuming Ankle uses IFRS. (5 marks) b) In 2017, Ankle receives the material from its supplier and pays the required $4,000,000. The material now has a market value of $3,400,000. Instructions Prepare the journal entry to record the purchase. (10 marks)

Solution

Journal Entry S. No. Date Particulars Dr. Amt. Cr. Amt. a. 31-Dec-16 Loss on Purchase Commitments        500,000.00 Purchase Commintments Liability        500,000.00 (Record the purchase commitment loss is recognized) b. 2017 Inventory    3,400,000.00 Purchase Commintments Liability        500,000.00 Loss on Purchase Commitments        100,000.00 Cash    4,000,000.00 (record the purchase of materials)