Exercise 9-10 (a) Since the market price is higher than the contract price, Volkan does not

need to make any entry for this matter. However, since the purchase commitment is material in amount, Volkan would disclose the contract in the notes to the financial statements. (b) Since the market price is lower than the contract price, Volkan needs to record the following entry to record the unrealized loss since Volkan is obligated to purchase the material for $3.00 per gallon but it only cost $2.70 in the market. DR $12,000 CR

Unrealized Holding Loss Estimated Liability on Purchase Commitments (c) Inventory (40,000 x $2.70) Estimated Liability on Purchase Commitments Cash (40,000 x $3.00)

$12,000

DR $108,000 $12,000

CR

$120,000

Exercise 9-13 (a) Beginning Inventory $38,000 Purchases $92,000 Freight-in $3,400 Purchase returns and allowances ($2,400) Net Purchases $93,000 Est. CoGAS $131,000 COGS ($120,000/1.33333) $90,000 Ending Inventory ($131,000-$90,000) $41,000 Less. Goods Damaged $10,900

Cost of Goods Damaged $30,100

(b)
Beginning Inventory $38,000 Purchases $92,000 Freight-in $3,400 Purchase returns and allowances, ($2,400) Net Purchases $93,000 Sales $120,000 Gross profit ($120,000*33.33%) $40,000 CoGAS $80,000 Ending Inventory $13,000 Less Goods Undamaged $10,900

Cost of goods destroyed $2,100