Company C is a mining company with 200,000 pounds of copper inventory at 1 September 2012, with

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Question:

Company C is a mining company with 200,000 pounds of copper inventory at 1 September 2012, with a total cost of USD640,000. On 1 September 2012, company C entered into a copper sale futures contract maturing on 1 February 2013, at a futures price of 3.25.

Copper spot and forward prices are as follows:

	Copper spot prices	Copper futures price for maturity 1 February 2013
1-Sep-12	3.22	3.25
31-Dec-12	3.25	3.29
1-Feb-13	3.3	3.3

Requirements

(a) Explain if a hedge exists; if so the type of hedge, hedging instrument and hedged item; if not why.

(b) Record the journal entries on 31 December 2012 and 1 February 2013

Posted Date: Dec 16, 2021 11:51 AM

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Company C is a mining company with 200,000 pounds of copper inventory at 1 September 2012, with

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Expert Answer:

Part a There is Hedge because we have entered into future sales contract for protecting us against a... View the full answer

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