An alfalfa co-op has an agreement with its farmers to purchase alfalfa at a price that is

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An alfalfa co-op has an agreement with its farmers to purchase alfalfa at a price that is currently 5% above the existing market price. In addition, the co-op has agreed to pay the farmers interest at 2% for each month delivery is delayed beyond December 31, 2011. Management expects that at least 14,500 tons will be delivered sometime after the balance sheet date.
Required
a. What factors should be considered in making an estimate of the loss accrual?
b. Assuming the amount of the purchase commitment is material, what information should management disclose in the footnotes to the financial statements concerning this purchase commitment?
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Auditing A Business Risk Approach

ISBN: 978-0538476232

8th edition

Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg

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