Robo Corporation Entered into Noncancelable, Long-Term Material Contracts with Suppliers

question 61

Multiple Choice

Robo Corporation entered into noncancelable, long-term material contracts with suppliers for the purchase of raw materials beginning in the calendar Year 4.These contracts amounted to $500,000 at December 31, Year 4, relating to raw materials with a market price of $575,000.This amount was considered material for Robo.
(CMA adapted, Dec 95 #16) Refer to the Robo Corporation example.Robo Corporation's financial statements at December 31, Year 4,

• A)include a contingent liability of $500,000.
• B)disclose the purchase commitment.
• C)include a liability of $575,000.
• D)do not mention this commitment.
• E)none of the above.

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