NGW, a consumer gas provider, estimates a rather cold winter. As a result it decides to enter into a futures contract on the NYMEX for natural gas on November 2, 2011. The trading unit is 10,000 million British thermal units (MMBtu). The three-month futures contract rate is $7.00 per MMBtu, so each contract will cost NGW $70,000. In addition, the exchange requires a $5,000 deposit on each contract. NGW enters into 20 such contracts. REQUIRED 1. Why is this futures contract likely to be considered an effective hedge and therefore qualified for hedge accounting? 2. Why would this transaction be accounted for as a cash flow hedge? 3. Assume that the December 31, 2011, futures contract rate is $6.75 for delivery on February 2, 2012, and the spot rate on February 2, 2012, is $6.85. Assume that NGW sells all of the gas on February 3, 2012, for $8.00 per MMBtu. Prepare all the necessary journal entries from November 2, 2011, through February 3, 2012, to account for this hedge situation.
NGW a consumer gas provider estimates a rather cold winter As a result it decides to enter into a futures contract on the NYMEX for natural gas on November 2 2011 The trading unit is 10000 million British thermal units MMBtu The threemonth futures contract rate is 700 per MMBtu so each contract...
The crude oil futures contract on the New York Mercantile Exchange covers 1,000 barrels of crude oil. The contract is quoted in dollars and cents per barrel (e.g., $27.42), and the minimum price change is $0.01. The initial margin requirement is $3,375, and the maintenance margin requirement is...
The multiplier for a futures contract on the stock-market index is $250. The maturity of the contract is one year, the current level of the index is 2,000, and the risk-free interest rate is .5% per month. The dividend yield on the index is .2% per month. Suppose that after one month, the stock...
The Northeast Independent School District in Bexar County, Texas, hired STR Constructors, Ltd., to renovate a middle school. STR subcontracted the tile work in the school\'s kitchen to Newman Tile, Inc. (NTI). The project had already fallen behind schedule. As a result, STR allowed other workers to...
To get a feel for higher order ODEs, show that the given functions are solutions and form a basis on any interval. Use Wronskians. In Prob. 6, x > 0, cos x, sin x, x cos x, x sin x, y iv + 2y\" + y = 0
Santana Rey expects second quarter 2012 sales of her new line of computer furniture to be the same as the first quarter’s sales (reported below) without any changes in strategy. Monthly sales averaged 40 desk units (sales price of $1,250) and 20 chairs (sales price of $500). BUSINESS SOLUTIONS...
You are a 3rd year trainee accountant at the internationally acclaimed audit firm, DPY Incorporated (DPY Inc.). You are based at the Durban office of DPY Inc. DPY Inc. are the auditors of Silky Hair (Pty) Ltd (Silky Hair) and you have been assigned to the audit for the year ended 31 December 2021....
The article \"Optimization of Surface Roughness in Drilling Using Vegetable-Based Cutting Oils Developed from Sunflower Oil\" (Industrial Lubrication and Tribology, 2011: 271-276) gave the following data on x1 = spindle speed (rpm), x2 = feed rate (mm/rev), x3 = drilling depth (mm), and y = surface...
On November 2, 2011, Baz, a U.S. retailer, ordered merchandise from Mat of Japan. The merchandise is to be delivered to Baz on January 30, 2012, at a price of 1,000,000 yen. Also on November 2, Import Baz hedged the foreign currency commitment with Mat by contracting with its exchange broker to buy...
Ins makes sophisticated medical equipment. A key component of the equipment is Grade A silver. On May 1, 2011, Ins enters into a firm purchase agreement to buy 1,200,000 troy ounces (equal to 100,000 pounds) of Grade A silver from Sil, for delivery on February 1, 2012, at the market price on that...
An online retailer has determined that the average time for credit card transactions to be electronically approved is 1.6 seconds.(a) Use an exponential density function to find the probability that a customer waits less than a second for credit card approval.(b) Find the probability that a...