Question: Connect Ltd. entered into a contract for the future purchase of 500 tonnes of aluminum, at a price of $3,300 per tonne. The spot price

Connect Ltd. entered into a contract for the future purchase of 500 tonnes of aluminum, at a price of $3,300 per tonne. The spot price at year end was $2,950 per tonne. The metal will be used to manufacture small aircraft. As a result of the decline in the price of aluminum, the average sales price of the aircrafts was reduced to $21,000 per aircraft. The costs of other components and the associated manufacturing are $9,000 per aircraft. Manufacturing one aircraft uses 4 tonnes of aluminum.

What amount should Connect recognize as a provision for this contract? Assume that the time value of money element is immaterial and that Connect reports using the IFRS framework.

	A. No provision is required for this contract.
	B. $175,000
	C. $1,200
	D. $150,000

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