Winter Quarters Company employs 30 analysts who closely track news about supply and demand for livestock and agricultural commodities. Winter Quarters uses that information to enter into futures contracts based on its prediction of which way agriculture prices are heading. On December 1, 2008, Winter Quarters entered into the following three contracts:

All three of the contracts are to be settled on January 1, 2009.
Instructions:
1. Make the adjusting journal entries necessary on December 31, 2008, assuming the following market prices per pound on that date: feeder cattle, $0.67; pork bellies, $0.69; and milk, $0.08.
2. Winter Quarters has much information about agricultural products. What advantages are there to using this information to trade derivative contracts rather than buying and selling cattle, hogs, and milk directly? What are thedisadvantages?

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Futures Price per Pound Market Price per Pound on Dec. 1, 2008 Type of Contract Quantity Purchase feeder catte...300,000 pounds Sell pork bellies Purchase milk 200,000 800,000 $0.75 0.60 0.10 $0.75 0.60 0.10