On June 1, Pitt Corp. sold merchandise with a list price of $5,000 to Burr on account. Pitt allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made FOB shipping point. Pitt prepaid $200 of delivery costs for Burr as an accommodation. On June 12, Pitt received from Burr a remittance in full payment amounting to:
On January 2 of the current year, LTTI Co. entered into a three-year, non-cancelable contract to buy up to 1 million units of a product each year at $.10 per unit with a minimum annual guarantee purchase of 200,000 units. At year end, LTTI had only purchased 80,000 units and decided to cancel sales of the product. What amount should LTTI report as a loss related to the purchase commitment as of December 31 of the current year?
The contract overall has a minimum total guarantee of 600,000 units, and only 80,000 units will be purchased. At $.10 per unit, the company is responsible for 520,000 units at $.10 per unit. The loss as a result will be $52,000 (520,000 x $0.10).
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