In 2010, Orear Manufacturing signed a contract with a supplier to purchase raw materials in 2011 for $700,000. Before the December 31, 2010 balance sheet date, the market price for these materials dropped to $510,000. The journal entry to record this situation at December 31, 2010 will result in a credit that should be reported
a. as a valuation account to Inventory on the balance sheet.
b. as a current liability.
c. as an appropriation of retained earnings.
d. on the income statement.
Ans: b. as a current liability.
Business
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