If the contract price on a noncancelable purchase commitment exceeds the market price, the buyer should record any expected losses on the commitment in the period in which the market decline takes place.

Question

Quizplus · Accepted Answer

According to accounting principles, if the market price falls below the contract price on a noncancelable purchase commitment, the buyer should recognize the expected loss in the period in which the market price declines. This is because the loss is considered incurred in that period due to the future obligation to purchase at a price higher than the current market value.

If the Contract Price on a Noncancelable Purchase Commitment Exceeds