Ivan has 14,000 barrels of oil that were purchased a month ago at $50.00 per barrel. On
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Ivan has 14,000 barrels of oil that were purchased a month ago at $50.00 per barrel. On November 1, 2014, Ivan hedges the value of the inventory by entering into a forward contract to sell 14,000 barrels of oil on January 31, 2015 for $60.00 per barrel. The forward contract is to be settled net.
Assume this is a fair value hedge. Assume a 6% discount rate is reasonable, and using a mixed-attribute model, prepare the journal entries to account for this hedge at the following dates: When the market price is November 1, 2014 $60.00 per barrel December 31, 2014 $65.00 per barrel January 31, 2015 $62.00 per barrel.
Related Book For
Fundamentals of Advanced Accounting
ISBN: 978-0077667061
5th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
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