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.

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Definitions:

Assimilation

The process by which individuals incorporate new information into existing schemas or frameworks of understanding.

Concrete Operational Stage

A stage in Piaget's theory of cognitive development, where children aged about 7 to 12 years can think logically about concrete events.

Decentering Stage

A cognitive development stage in which children start to understand perspectives and feelings of others, moving beyond self-centered thought.

Abstract Operational Stage

A stage of cognitive development in Jean Piaget's theory, typically occurring from around age 12 and up, when individuals gain the ability to think abstractly and logically.