Our company reports commodities inventory on our balance sheet at $1 million. The inventory has a fair
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Question:
Our company reports commodities inventory on our balance sheet at $1 million. The inventory has a fair value of $1.1 million and we are concerned about a forecasted decline in the commodity price. We a financial derivative in order to mitigate this risk. On the last day of the period, the fair value of the inventory declined by $25,000 whereas, the fair value of the derivative increased by $22,500. All of the inventory is sold at its fair value and the derivative is settled on the last day of the period. Complete the following table of the required journal entries during the period:
Use a negative sign with your answers to indicate a credit entry.
Debit (Credit) | ||||
---|---|---|---|---|
Cash | Derivative | Inventory | Earnings | |
Recognize the change in the fair value of the derivative | $Answer | $Answer | $Answer | $Answer |
Recognize the change in the fair value of the inventory | Answer | Answer | Answer | Answer |
Recognize revenue from the sale | Answer | Answer | Answer | Answer |
Recognize cost of goods sold relating to the sale | Answer | Answer | Answer | Answer |
Recognize settlement of the derivative | Answer | Answer | Answer | Answer |
Related Book For
Advanced Accounting
ISBN: 978-0077431808
10th edition
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
Posted Date: