During 2017,PharoahCo., a manufacturer of chocolate candies, contracted to purchase254000pounds of cocoa beans at $4.40per pound, delivery to be made in the spring of 2018. Because a record harvest is predicted for 2018, the price per pound for cocoa beans had fallen to $3.50by December 31, 2017.

Of the following journal entries, the one which would properly reflect in 2017 the effect of the commitment ofPharoahCo. to purchase the254000pounds of cocoa is

A Cocoa Inventory 889000 Loss on Purchase Commitments 228600 Accounts Payable 1117600

B Cocoa Inventory 1117600 Accounts Payable 1117600

C Unrealized Holding Gain or Loss-Income 228600 Estimated Liability on Purchase Commitments 228600 No entry would be necessary in 2017