Describe the accounting policy decision

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Problem 1: For each situation below, describe the accounting policy decision. Describe the impact that the chosen policy has had on earnings and the SFP. If the company's policy is not correct or if there is an alternate policy that should be considered, briefly explain the alternative.

a) At the end of 20X0, Company Ltd. entered into a binding commitment to buy 100 units of a certain type of inventory at cost of $15,000/unit by the end of 20X3. In 20X1, the company bought 50 units, all of which were used in production. In 20X2 the company purchased 40 units and recorded them in inventory at $600,000 (i.e., 40 x $15,000). The market value/unit has been $17,000 during 20X0, dropped to $13,000 in 20X1, and rose again to $14,000 by the date of the 20X2 acquisition. It is now the end of 20X2.

Reference no: EM132964261

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