In 2015, Orear Manufacturing Signed a Contract with a Supplier

question 23

Multiple Choice

In 2015, Orear Manufacturing signed a contract with a supplier to purchase raw materials in 2016 for $700,000.Before the December 31, 2015 statement of financial position date, the market price for these materials dropped to $510,000.The journal entry to record this situation at December 31, 2015 will result in a credit that should be reported

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

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Definitions:

Regulatory Focus Theory

A promotion focus causes people to be approach-oriented in constructing a sense of self; a prevention focus causes people to be more cautious and avoidant in constructing a sense of self.

Promotion Focus

A motivational orientation aimed at achieving positive outcomes and realizing aspirations or dreams.

Prevention Focus

A motivational orientation geared towards avoiding negative outcomes or maintaining safety and security.

Self-Perception Theory

A theory suggesting that individuals form their attitudes and emotions by observing their own behavior and context, especially when internal cues are difficult to interpret.