Prater Company has been having difficulty obtaining key raw materials for its manufacturing process. The company therefore signed a long-term, non-cancelable purchase commitment with its largest supplier of this raw material on November 30, 2015, at an agreed price of $400,000.

At December 31, 2015, the raw material had declined in price to $375,000.

Instructions What entry would you make on December 31, 2015, to recognize these facts?