During 2020, Moss Company signed a contract with a supplier to purchase 42,000 subassemblies at $30 each during 2021. The company uses the FIFO method to account for inventory. Assume Moss Company uses a periodic inventory system.

a. The cost of subassemblies had declined and the estimated net realizable value is $1,190,000 on December 31, 2020. Prepare any year-end entry required for this cost decline.

b. The subassemblies are received in 2021 when the net realizable value is estimated at $1,190,000. The contract was paid in full. Prepare the required purchase entry in 2021.

Account Name Dr. Cr.

a. Answer Estimated Loss on Purchase Commitment

b. Subassemblies Purchases