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 purchase commitment for the purchase of 1 million gallons of jet fuel at a price of $4.60 per gallon for delivery during the coming summer. The company prices its inventory at the lower of cost or market. If the market price for jet fuel at the end of the year is $4.25, how would this situation be reflected in the annual financial statements?

• A) Record unrealized gains of $350,000 and disclose the existence of the purchase commitment.
• B) No impact.
• C) Record unrealized losses of $350,000 and disclose the existence of the purchase commitment.
• D) Only disclose the existence of the purchase commitment.

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Definitions:

Spinning

The process of turning fibers into yarn or thread by twisting them together, either manually or with machinery.

External Communication

The process of exchanging information between a company and external parties such as customers, suppliers, investors, and the public.

Cynical Listening

A type of listening where the listener doubts or questions the sincerity or validity of the speaker's messages.

Grapevine

An informal communication network within an organization, spreading information through personal contacts and conversations.