PROBLEM 14 (Adapted)

Mimi Company has been having difficulty obtaining necessary raw materials for its manufacturing process. The company, therefore, signed a long-term noncancelable purchase commitment with its largest supplier of this raw material on Jun3 30, 2020, at an agreed price of P800,000. On December 31, 2020, the raw material had declined in price to P720,000.

Required:

1. What entry would you make on December 31, 2020, to recognize these facts?

2. Assuming that on March 31, 2021, Mimi Company purchases the raw materials. During this time, the market price of the raw materials is P810,000? P780,000? P690,000?