Assume that a walnut farmer agrees to supply 100,000 pounds of walnuts to Diamond Foods during the Fall 2009 crop season. The walnuts are delivered on September 15, 2009 when the estimated price is $0.80/pound. Diamond agrees to make payments according to the following schedule:October 12, XXXXXXXXXXpercent of the estimated price. Estimated price is $0.80/pound.February 15, XXXXXXXXXXpercent of the total payment based on the latestestimated price will be paid by this date. Estimated price on this date is $0.90/pound.August 15, 2010 -The remaining payment is made.On April 15, 2010, Diamond announces to all the walnut suppliers that the final price for the Fall 2009 crop will be $1.00/pound. On May 15, 2010, Diamond sells 88 percent of the walnuts purchased from the farmer for cash at the rate of $1.20/pound. The remaining 12 percent of the walnuts is carried in inventory to the following fiscal year.
Prepare the necessary journal entries in the books of Diamond Foods on (1) September 15, 2009, (2) October 15, 2009, (3) February 15, 2010, (4) April 15, 2010, (5) May 15, 2010, and (6) August 15, 2010. Also, present the necessary adjusting entries, if any, at the end of Diamond’s fiscal year on July 31, 2010. Closing entries need not be presented. Assume that Diamond follows a perpetual inventory system.