In 2014, Orear Manufacturing Signed a Contract with a Supplier

question 160

Multiple Choice

In 2014, Orear Manufacturing signed a contract with a supplier to purchase raw materials in 2015 for $700,000. Before the December 31, 2014 balance sheet date, the market price for these materials dropped to $510,000. The journal entry to record this situation at December 31, 2014 will result in a credit that should be reported

• A) as a valuation account to Inventory on the balance sheet.
• B) as a current liability.
• C) as an appropriation of retained earnings.
• D) on the income statement.

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Definitions:

Embroidered

Decorated with needlework, often with colorful threads, to create designs or patterns on fabric.

Aprons

Protective garments worn to keep clothes clean during cooking or other activities.

Annual Salary

The total amount of money earned by an employee in a year, not including bonuses or other extra payments.

Direct Deposit

Payroll or other types of checks that are directly and electronically deposited into a bank account.