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What is the journal entry to record the purchase 


1.	Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers. For a recent shipment, the company paid $3,000 and received 8,500 pieces of candy that are allocated among three groups. Group 1 consists of 2,500 pieces that are expected to sell for $0.25 each. Group 2 consists of 5,500 pieces that are expected to sell for 0.60 each. Group 3 consists of 500 pieces that are expected to sell for $1.20 each. Using the relative sales value method, what is the cost per item in group 2?
a.	$0.375.
b.	$0.600.
c.	$0.350.
d.	$.0398.

	2.	Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers. For a recent shipment, the company paid $3,000 and received 8,500 pieces of candy that are allocated among three groups. Group 1 consists of 2,500 pieces that are expected to sell for $0.25 each. Group 2 consists of 5,500 pieces that are expected to sell for 0.60 each. Group 3 consists of 500 pieces that are expected to sell for $1.20 each. Using the relative sales value method, what is the cost per item in group 3?
a.	$0.796.
b.	$0.375.
c.	$1.200.
d.	$0.900.

	3.	During the current fiscal year, Jeremiah Corp. signed a long-term noncancellable purchase commitment with its primary supplier. Jeremiah agreed to purchase $2.5 million of raw materials during the next fiscal year under this contract. At the end of the current fiscal year, the raw material to be purchased under this contract had a market value of $2.3 million. What is the journal entry at the end of the current fiscal year?
a.	Debit Unrealized Holding Loss for $200,000 and credit Purchase Commitment Liability for $200,000.
b.	Debit Purchase Commitment Liability for $200,000 and credit Unrealized Holding Gain for $200,000.
c.	Debit Unrealized Holding Loss for $2,300,000 and credit Purchase Commitment Liability for $2,300,000.
d.	No journal entry is required.

	4.	During the prior fiscal year, Jeremiah Corp. signed a long-term noncancellable purchase commitment with its primary supplier to purchase $2.5 million of raw materials. Jeremiah paid the $2.5 million to acquire the raw materials when the raw materials were only worth $2.2 million. Assume that the purchase commitment was properly recorded. What is the journal entry to record the purchase ?
a.	Debit Inventory for $2,200,000, and credit Cash for $2,200,000.
b.	Debit Inventory for $2,200,000, debit Unrealized Holding Loss for $300,000, and credit Cash for $2,500,000.
c.	Debit Inventory for $2,200,000, debit Purchase Commitment Liability for $300,000 and credit Cash for $2,500,000.
d.	Debit Inventory for $2,500,000, and credit Cash for $2,500,000.

5.	During 2010, Larue Co., a manufacturer of chocolate candies, contracted to purchase 100,000 pounds of cocoa beans at $4.00 per pound, delivery to be made in the spring of 2011. Because a record harvest is predicted for 2011, the price per pound for cocoa beans had fallen to $3.10 by December 31, 2010.
Of the following journal entries, the one which would properly reflect in 2010 the effect of the commitment of Larue Co. to purchase the 100,000 pounds of cocoa is
	a.	Cocoa Inventory		400,000
			Accounts Payable			400,000
	b.	Cocoa Inventory		310,000
		Loss on Purchase Commitments		90,000
			Accounts Payable			400,000
	c.	Unrealized Holding Loss		90,000
			Purchase Commitments Liability			90,000
	d.	No entry would be necessary in 2010



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