During the Prior Fiscal Year, Jeremiah Corp

question 27

Multiple Choice

During the prior fiscal year, Jeremiah Corp.signed a long-term noncancellable purchase commitment with its primary supplier to purchase $2.5 million of raw materials.Jeremiah paid the $2.5 million to acquire the raw materials when the raw materials were only worth $2.2 million.Assume that the purchase commitment was properly recorded.What is the journal entry to record the purchase?

• A)Debit Inventory for $2,200,000, and credit Cash for $2,200,000.
• B)Debit Inventory for $2,200,000, debit Unrealized Holding Loss for $300,000, and credit Cash for $2,500,000.
• C)Debit Inventory for $2,200,000, debit Purchase Commitment Liability for $300,000 and credit Cash for $2,500,000.
• D)Debit Inventory for $2,500,000, and credit Cash for $2,500,000.

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Definitions:

Employment-Related Expenses

Costs incurred by employees during the course of their job that are necessary and not reimbursed by the employer, possibly deductible under certain conditions.

Joint Taxpayer

Two individuals, usually married, who file a single tax return together, combining their incomes and sharing deductions.

Education Credit Deduction

A type of deduction that allows eligible taxpayers to subtract education expenses from their taxable income, enhancing affordability for higher education.

Dependent

An individual, usually a child or spouse, who relies on another person (typically a family member) for financial support and qualifies for certain tax benefits on that person’s tax return.