During the Current Fiscal Year, Jeremiah Corp

Multiple Choice

During the current fiscal year, Jeremiah Corp. signed a long-term noncancellable purchase commitment with its primary supplier. Jeremiah agreed to purchase $1.5 million of raw materials during the next fiscal year under this contract. At the end of the current fiscal year, the raw material to be purchased under this contract had a market value of $1.2 million. What is the journal entry at the end of the current fiscal year?

A) Debit Unrealized Holding Gain or Loss for $300,000 and credit Estimated Liability on Purchase Commitment for $300,000.
B) Debit Estimated liability on Purchase Commitments for $300,000 and credit Unrealized Holding Gain or Loss for $300,000.
C) Debit Unrealized Holding Gain or Loss for $1,200,000 and credit Estimated Liability on Purchase Commitments for $1,200,000.
D) No journal entry is required.