LEW Jewellery Corp. uses gold in the manufacture of its products. LEW anticipates that it will need to pur chase 500 ounces of gold in October 2011 for jewellery that will be shipped for the holiday shopping season. However, if the price of gold increases, LEW's cost to produce its jewellery will increase, which could reduce its profit margins.
To hedge the risk of increased gold prices, on April 1, 2011, LEW enters into a gold futures contract and designates this contract as a cash flow hedge of the anticipated gold purchase (under IFRS). The notional amount of the contract is 500 ounces, and the terms of the contract require LEW to purchase gold at a price of $300 per ounce on October 31, 2011 (or settle the contract net on the basis of the difference between the $300 and the gold price at October 31). Assume the following data with respect to the price of the futures contract. Ignore margin deposits; i.e., assume none were paid.

Instructions
Prepare the journal entries for the following transactions:
(a) April 1, 2011: Inception of the forward contract.
(b) June 30, 2011: LEW prepares financial statements.
(c) September 30, 2011: LEW prepares financial statements.
(d) October 31, 2011: LEW purchases 500 ounces of gold at $300 per ounce under the forward contract.
(e) December 20, 2011: LEW sells for $350,000 jewellery containing the gold purchased in October 2008. The cost of the finished goods inventory is $200,000.
(f) Indicate the amount(s) reported on the statement of financial position and income statement related to the futures contract on June 30, 2011.
(g) Indicate the amount(s) reported on the income statement related to the futures contract and the inventory transactions on December 31, 2011.

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Date Apr. 1, 2011 June 30, 2011 Sept. 30, 2011 Oct. 31, 2011 Fair Value of Futures Contract $5,000 $7,500 $7,500