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On December 4, 20X8, DoCo enters into a contractual agreement to take delivery on January 25, 20X9 of 10, 000 pounds of nuts at a
On December 4, 20X8, DoCo enters into a contractual agreement to take delivery on January 25, 20X9 of 10, 000 pounds of nuts at a cost of $2.20 per pound. On December 31, 20X8, DoCo finds that the market price of the nuts has declined to $1.90 per pound, and management decides that the decline is permanent. DoCo should show these developments on its 20X8 financial statements as. .. $22, 000 liability $19, 000 liability $3, 000 liability no liability When DoCo takes delivery on January 25, 20X9, the market price of nuts in $1.75 per pound. As a result, DoCo should. .. debit Inventory $17, 500 debit Inventory $22, 000 debit Loss $4, 500 debit Retained Earnings $3, 000
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