Metallic Wonders Corporation has an inventory of metals carried at a cost of$1,000,000. The company plans to sell the inventory in about 60 days, and wishes to guarantee the current60‑day futures price of $1,400,000. On December 1, 2020, it takes a $1,400,000 short position in metal futures for delivery in 60 days. No margin deposit is required. The futures position is a qualified fair value hedge of the inventory, and the company elects to use hedge accounting. The company closes its futures position on January 31, 2021, and sells the metals on the spot market on February 5, 2021. The company’s accounting year ends December 31.

Spot and futures prices for the inventory are:

Spot price

on January 31, 2021

Spot price Futures price for delivery

on January 31, 2021

December 1, 2020 ......................... $1,340,000...………..$1,400,000

December 31, 2020 ........................ 1,245,000...………… 1,310,000

January 31, 2021 .......................... 1,200,000...………….. 1,200,000

February 5, 2021 .......................... 1,290,000...…………….... N/A

1. At what amount is the inventory reported on Metallic Wonders’ December 31, 2020, balance sheet?

a. $ 905,000

b. $ 910,000

c. $1,000,000

d. $1,250,000

Answer rating: 100% (QA)

Option C 1000000 is correct Explanation Cost of inven... View the full answer