Question

On June 1, 2019 Futures-B Company buys for speculation 100 contracts on the Chicago Board of Trade (CBT) to buy August delivery of wheat from a certified warehouse.  Each contract is in units of 5,000 bushels at a future price of $1.50 per bushel.  The contracts will be settled on August 31, 2019 at the spot price.  The following information applies:

                                                June 1              June 30            July 31            

Futures price per bushel            $1.50               $1.55               $1.40                            

Spot price per bushel                 $1.48               $1.44               $1.40  

Fair Value of Contract$   0                                       

Required: Parts c, e, g, i, k and m are 1 point each.  The rest are 2 points each

21)  This is:   A Fair Value Hedge      A Cash Flow Hedge      Not a Hedge            Pick one

22) On the June 30, 2019 Statement of Financial Position, what amount, if any, would be listed for the Derivative-Wheat Futures Contract

23) If your answer to 22 was not zero, would the amount be an asset or liability?  If zero put neither

24) On the July 31, 2019 Statement of Financial Position, what amount, if any, would be listed for the Derivative-Wheat Futures Contract

25) If your answer to 24 was not zero, would the amount be an asset or liability?  If zero put neither

26)  On the Income Statement for month ended June 30, 2019, what amount, if any, would appear as a gain or loss

27) If your answer to 26 is not zero, is it a gain or loss? If zero put neither.

28)  On the Income Statement for month ended July 31, 2019, what amount, if any, would appear as a gain or loss?

30)  On the Income Statement for yearended July 31, 2019, what amount, if any, would appear as a gain or loss

31) If your answer to 30 is not zero, is it a gain or loss?  If zero put neither

32)  On the Statement of Comprehensive income for year ended July 31, 2019, what amount, if any, would appear as a gain or loss as Other Comprehensive Income?  

33) If your answer to 32 is not zero, is it a gain or loss?  If zero put neither.

Answer 1

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