Clear Creek Cereal Co. buys 100 contracts on the Chicago Board of Trade (CBT) to receive November delivery of corn to a certified warehouse. Each contract is in units of 5,000 bushels at a future price of $3.25 per bushel. McCulley Farms agrees to sell corn at a November futures price of $3.25. The CBT acts as the broker between the parties. The initial margin in the contract is set at $50,000, and a maintenance margin of $40,000 is required. The following corn prices are related to the contract.

Day 1 - future price $3.25

Day 2 - future price $3.27

Day 3 - future price $3.24

Day 4 - future price $3.20

Requirement:

Make all entries necessary for Clear Creek to record the above transaction and activity.

Answer rating: 100% (QA)

Working Note Day Original Buy priceA Future priceClosingB Changes in ... View the full answer