During 2016, R Corp., a manufacturer of chocolate candies, contracted to purchase 100,000 pounds of cocoa beans at $1.00 per pound, delivery to be made in the spring of 2017. Because a record harvest is predicted for 2017, the price per pound for cocoa beans had fallen to $0.80 by December 31, 2016.

Of the following journal entries, the one that would properly reflect in 2016 the effect of the commitment of R Corp. to purchase the 100,000 pounds of cocoa is:

PAGE 1 GENERAL JOURNAL ACCOUNT TITLE POST. REF CREDIT DATE Dec 31 Inventory DEBIT 100,000.00 1 2 Accounts Payable 100,000.00 PAGE 1 GENERAL JOURNAL DATE POST. REF. CREDIT DEBIT 80,000.00 1 ACCOUNT TITLE Dec 31 Inventory Loss on Purchase Commitments Accounts Payable 2 20,000.00 3 100,000.00 OT 0 PAGE 1 GENERAL JOURNAL ACCOUNT TITLE POST. REF. DEBIT CREDIT DATE Dec 31 1 Loss on Purchase Commitments 20,000.00 2 Accrued Loss on Purchase Commitments 20,000.00 d. No entry would be necessary in 2016