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What would be your recommendation for reporting the purchase

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Question - On October 1, 2018, DAW Inc. signed a long-term, non-cancellable purchase commitment with a major supplier to purchase raw materials needed for production of the company's product during 2019 for $1,000,000. On December 31, 2018, the last day of the fiscal year, the raw materials to be purchased had a market value of $950,000. As the outsider auditor, explain to your client what, if any, GAAP would apply to the status of the purchase commitment. What would be your recommendation for reporting the purchase commitment at year end?

Reference no: EM132125835

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