American Italian Pasta Company (AIPC) manufactures several varieties of pasta. On January 1, 2016, AIPC had...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
American Italian Pasta Company (AIPC) manufactures several varieties of pasta. On January 1, 2016, AIPC had excess commodity inventories carried at acquisition cost of $150,000. These commodities could be sold or manufactured into pasta later in the year. To hedge against possible declines in the value of its commodities inventory, on Janu- ary 6 AIPC sold commodity futures, obligating the company to deliver the commodities in February for $160,000. The futures exchange requires a $10,000 margin deposit. On February 19, the futures price increased to $171,000 and the company closed out its futures contract. Spot prices continued to rise and AIPC sold its inventory for $173,500 in cash on March 2. Required Prepare the journal entries related to AIPC's futures contract and sale of commodities inventory. Assume a perpetual inventory system, that spot and futures prices move in tandem, and the futures position qualifies for hedge accounting. b. By how much would AIPC's profit increase if the hedge was not undertaken? American Italian Pasta Company (AIPC) manufactures several varieties of pasta. On January 1, 2016, AIPC had excess commodity inventories carried at acquisition cost of $150,000. These commodities could be sold or manufactured into pasta later in the year. To hedge against possible declines in the value of its commodities inventory, on Janu- ary 6 AIPC sold commodity futures, obligating the company to deliver the commodities in February for $160,000. The futures exchange requires a $10,000 margin deposit. On February 19, the futures price increased to $171,000 and the company closed out its futures contract. Spot prices continued to rise and AIPC sold its inventory for $173,500 in cash on March 2. Required Prepare the journal entries related to AIPC's futures contract and sale of commodities inventory. Assume a perpetual inventory system, that spot and futures prices move in tandem, and the futures position qualifies for hedge accounting. b. By how much would AIPC's profit increase if the hedge was not undertaken?
Expert Answer:
Answer rating: 100% (QA)
A 1 a Date Accounts title and Explanation Debit Credit 06012016 Investment in future ... View the full answer
Related Book For
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III
Posted Date:
Students also viewed these accounting questions
-
It is thought that the number of goals scored in a sports match can be modelled by a Poisson distribution. To test this theory the number of goals in 50 games was collected and the data is shown in...
-
A firm had merchandise inventory of 52,500 on January 1 2016 and had purchases of 60,000 freight in of 300 purchases returns and allowances of 3,800 and purchases discounts of 1,400 during 2016 The...
-
QUESTION 4 Estimate the population regression model: 3 TestScore=B+B STR +B Income + Lunch + B Income? +B Income + u 1 i i i i i where E[uISTR]=0 and predict TestScore at the sample median of all...
-
Which of the theoretical approaches are the most useful in explaining your organisations current IHRM policies and practices?
-
A marketing researcher surveyed 92 individuals, asking them if they liked a new product concept or not. The results are shown below: Convert the data into percentages. Then construct a chart of the...
-
What would be the bias value for a. A base-2 exponent (B = 2) in a 6-bit field? b. A base-8 exponent (B = 8) in a 7-bit field?
-
If \(P=150 \mathrm{kN}\), determine the total strain energy stored in the truss. Each member has a cross-sectional area of \(8.0\left(10^{3} ight) \mathrm{mm}^{2}\) and is made of A-36 steel. P D -3...
-
Rock N Roll produces an outdoor concert festival that runs from June 28, 2010, through July 1, 2010. Concertgoers pay $80 for a four-day pass to the festival, and all 10,000 tickets are sold out by...
-
2. Consider the following pieces of JAVA code: public Course { public String name; public int enrollment; public double averageGrade; Course(String setName, String setEnrollment, double...
-
The Income Statement and Balance Sheet consistently tell a financial story. That story has many chapters and can change dramatically based upon macroeconomic conditions. Locate the Form 10-K of a...
-
Journalize entries to record transactions related to bad debts Presented below is an aging schedule for Loucks Company Customer Alma Browne Conlon Dalton Others Estimated Percentage Uncollectible...
-
Answer all the questions below: Use the definition as it was discussed in the lecture with x as the left end of the following subinterval to find the area under the curve y = f(x) over the specified...
-
Determine the income yield, capital gains yield and total return given information below: (a) A 6 percent bond purchased a year ago or $990 that is currently selling for $995 (b) A stock that was...
-
Solve the following problems. Take all final answers to two decimal places. (a) A rectangular sheet of metal is twice as long as it is wide. Squares 3 cm by 3 cm, are cut from each comer and the ends...
-
Column A contains 75 randomly generated integers. Use python to graph the distribution of numbers in the x and y axis. Choose your own styling, title, and labels. Then determine the following in your...
-
1. What is the total additional paid-in capital? 2. What is the total contributed capital? 3. What is the total legal capital from ordinary shares? 4. What is the total legal capital from preference...
-
You are given the following information: EUR deposit rate for 1 year 2% EUR borrowing rate for 1 year Australian Dollar deposit rate for 1-year Australian Dollar borrowing rate for 1 year AUD/EUR...
-
In each of the following independent cases, document the system using whatever technique(s) your instructor specifies. a. Dreambox Creations (www.dreamboxcreations.com/) in Diamond Bar, California,...
-
Property Tax Transactions On July 10, the town of Salt Flats, Utah levied property taxes of $30,000,000. Based on past experience, town management estimated that the town will not collect 4 percent...
-
Consolidation Below are the condensed balance sheets of Princecraft and Sylvan Companies at December 31, 2012. On January 1, 2013, Princecraft acquired all of the voting shares of Sylvan by issuing...
-
In 2007 Clearly Canadian Beverage Corporation acquired My Organic Baby Inc. (MOB), a leading Canadian producer of organic baby food. The total purchase price was $4,913,000, consisting of $369,000 in...
-
_____________ is also used as requirement finding and feasibility testing tool. (a) Prototype (b) Reports (c) System (d) Procedure
-
A prototype can be ___________. (a) Complete system with partial requirements (b) Working model (c) Full-fledged system (d) All of these
-
Which of the following systems development approach is adopted if information requirements are not well defined? (a) SDLC (b) Prototype (c) Structured approach (d) Agile
Study smarter with the SolutionInn App