Chapter 9, Problem 9.18P

Purchase commitments

• Appendix

In November 2018, the Brunswick Company signed two purchase commitments. The first commitment requires Brunswick to purchase 10,000 units of inventory at $10 per unit by December 15, 2018. The second commitment requires the company to purchase 20,000 units of inventory at $11 per unit by March 15, 2019. Brunswick’s fiscal year-end is December 31. The company uses a periodic inventory system. Both contracts were exercised on their expiration date.

Required:

1. 1. Prepare the journal entry to record the December 15 purchase for cash assuming the following alternative unit market prices on that date:
   1. a. $10.50
   2. b. $ 9.50
2. 2. Prepare any necessary adjusting entry at December 31, 2018, for the second purchase commitment assuming the following alternative unit market prices on that date:
   1. a. $12.50
   2. b. $10.30
3. 3. Assuming that the unit market price on December 31, 2018, was $10.30, prepare the journal entry to record the purchase on March 15, 2019, assuming the following alternative unit market prices on that date:
   1. a. $11.50
   2. b. $10.00