If a material amount of inventory has been ordered through a formal purchase contract at the balance sheet date for future delivery at firm prices,
A) this fact must be disclosed.
B) disclosure is required only if prices have declined since the date of the order.
C) disclosure is required only if prices have since risen substantially.
D) an appropriation of retained earnings is necessary.

Question

Quizplus · Accepted Answer

The fact that a material amount of inventory has been ordered through a formal purchase contract at the balance sheet date for future delivery at firm prices must be disclosed in the financial statements. This is because it is relevant information that could impact the financial position and performance of the company. Even if prices have not declined or risen since the date of the order, disclosure is still required.

If a Material Amount of Inventory Has Been Ordered Through