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  • Fa2 Bautistaairways

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    Jasper Gica
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    The company had a contract to purchase aviation fuel for $9 million but the market value on December 31, 2010 was only $6.6 million, resulting in a $2.4 million loss on the purchase commitment. Then in March 2008, the market value rose to $9.3 million, eliminating the previous loss and resulting in a $2.4 million gain on the purchase commitment. The entry to record the initial $2.4 million loss on December 31, 2007 was to debit Loss on purchase commitment and credit Estimated liability for purchase commitment for $2.4 million.

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    FA2_BAUTISTAAIRWAYS

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    The company had a contract to purchase aviation fuel for $9 million but the market value on December 31, 2010 was only $6.6 million, resulting in a $2.4 million loss on the purchase commitment. Then in March 2008, the market value rose to $9.3 million, eliminating the previous loss and resulting in a $2.4 million gain on the purchase commitment. The entry to record the initial $2.4 million loss on December 31, 2007 was to debit Loss on purchase commitment and credit Estimated liability for purchase commitment for $2.4 million.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    17 views1 page

    Fa2 Bautistaairways

    Uploaded by

    Jasper Gica
    The company had a contract to purchase aviation fuel for $9 million but the market value on December 31, 2010 was only $6.6 million, resulting in a $2.4 million loss on the purchase commitment. Then in March 2008, the market value rose to $9.3 million, eliminating the previous loss and resulting in a $2.4 million gain on the purchase commitment. The entry to record the initial $2.4 million loss on December 31, 2007 was to debit Loss on purchase commitment and credit Estimated liability for purchase commitment for $2.4 million.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    of 1

    The loss on purchase commitment on December 31, 2010 is

    Contract price ₱9,000,000


    Market Value, 12/31/10 (3000 x ₱2,200) ₱6,600,000
    Loss on Purchase commitment, December 31, 2007 ₱2,400,000

    The gain on purchase commitment on March 31, 2008 is


    Market Value, March 31, 2008 (3,000 x 3,100) ₱9,300,000
    Market Value, December 31, 2007 (3,000 x ₱2,200) 6,600,000
    Increase in Market Value 2,700,000
    Loss on Purchase Commitment, December 31, 2007 2,400,000
    Gain on purchase commitment (maximum) 2,400,000

    What is the entry to record the change in aviation fuel prices on December 31, 2007?

    Lost on purchase commitment 2,400,000


    Estimated liability for purchase commitment 2,400,000

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