During the Prior Fiscal Year, Jeremiah Corp

question 44

Multiple Choice

During the prior fiscal year, Jeremiah Corp. signed a long-term noncancellable purchase commitment with its primary supplier to purchase $1.5 million of raw materials. Jeremiah paid the $1.5 million to acquire the raw materials when the raw materials were only worth $1.2 million. Assume that the purchase commitment was properly recorded. What is the journal entry to record the purchase?

• A) Debit Inventory for $1,200,000, and credit Cash for $1,200,000.
• B) Debit Inventory for $1,200,000, debit Unrealized Holding Gain or Loss for $300,000, and credit Cash for $1,500,000.
• C) Debit Inventory for $1,200,000, debit Estimated Liability on Purchase Commitments for $300,000 and credit Cash for $1,500,000.
• D) Debit Inventory for $1,500,000, and credit Cash for $1,500,000.

---

Definitions:

Defraud Creditors

The act of using deception or dishonesty to deny creditors their rightful claims on assets or funds.

Bankruptcy Code

The codified set of federal laws that govern bankruptcy proceedings in the United States, providing for various forms of debt relief for individuals and businesses.

Dismissal

The termination of a legal case or the discharge of an employee from their job position.

Petition

A formal written request to an authority, especially a government or a court, seeking a particular judicial action or remedy.