The account, Accrued Loss on Purchase Commitments, used when the year-end market price is less than the fixed purchase price for non-cancellable purchase obligations is reported as a(n)

A) liability on the balance sheet
B) contra asset to inventory on the balance sheet
C) extraordinary item on the income statement
D) component of income from continuing operations

Question

Sabrina Norman · Accepted Answer

Final Answer : A, Explanation :  The account, Accrued Loss on Purchase Commitments, represents an obligation to purchase goods at a fixed price that is greater than the current market price. As such, it represents a liability that should be reflected on the balance sheet.

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