At the End of the Fiscal Year, Apha Airlines Has

question 47

Multiple Choice

At the end of the fiscal year, Apha Airlines has an outstanding non-cancellable purchase commitment for the purchase of 1 million gallons of jet fuel at a price of €4.10 per gallon for delivery during the coming summer. The company prices its inventory at the LCNRV.
If the market price for jet fuel at the end of the year is €4.50, how would this situation be reflected in the annual financial statements?

• A) Record unrealized gains of €400,000 and disclose the existence of the purchase commitment.
• B) No impact.
• C) Record unrealized losses of €400,000 and disclose the existence of the purchase commitment.
• D) Disclose the existence of the purchase commitment.

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Definitions:

Regression

A defense mechanism leading to the temporary or long-term reversion of the ego to an earlier stage of development rather than handling unacceptable impulses in a more adult way.

Defense Mechanism

Psychological strategies unconsciously used to protect a person from anxiety arising from unacceptable thoughts or feelings.

Tantrums

Emotional outbursts, typically seen in children, characterized by crying, screaming, or aggressive behavior as a response to frustration or inability to communicate needs.

Displacement

A defense mechanism where an individual redirects emotional feelings from a more threatening object or person to a less threatening one.