Multiple Choice
At the end of the fiscal year, Apha Airlines has an outstanding non-cancellable purchase commitment for the purchase of 1 million gallons of jet fuel at a price of €4.10 per gallon for delivery during the coming summer. The company prices its inventory at the LCNRV.
If the market price for jet fuel at the end of the year is €4.50, how would this situation be reflected in the annual financial statements?
A) Record unrealized gains of €400,000 and disclose the existence of the purchase commitment.
B) No impact.
C) Record unrealized losses of €400,000 and disclose the existence of the purchase commitment.
D) Disclose the existence of the purchase commitment.
Correct Answer:
Verified
Correct Answer:
Verified
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