On July 10, 2018, Johnson Corporation Signed a Purchase Commitment

question 107

Multiple Choice

On July 10, 2018, Johnson Corporation signed a purchase commitment to purchase inventory for $200,000 on or before February 15, 2019. The company's fiscal year-end is December 31. The contract was exercised on February 1, 2019, and the inventory was purchased for cash at the contract price. On the purchase date of February 1, the market price of the inventory was $210,000. The market price of the inventory on December 31, 2018, was $180,000.
-The company uses a perpetual inventory system. How much loss on purchase commitment will Johnson recognize in 2018?

• A) $10,000.
• B) $20,000.
• C) $30,000.
• D) None.

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Definitions:

Consumer Safety

Measures and regulations aimed at preventing harm to consumers and ensuring that the products they use are free from dangerous defects.

Rent Seeking

An economic concept referring to the practice of individuals or firms using their resources to gain government favors or advantages without creating new wealth, often through lobbying or other non-productive means.

Wealth Transfer

Refers to the movement of assets or capital from one individual, group, or entity to another, often as a result of inheritance, gifts, or strategic financial planning.

Society's Expense

The costs or negative outcomes borne by the general public or society at large, often as a result of business activities or policies.