Warsaw Signal Company specializes in predicting price movements in the soybean market. On November 1, 2013, it was convinced that soybean prices were too low. Accordingly, Warsaw entered into futures contracts to purchase 50,000 bushels of soybeans at $5.00 per bushel on January 1, 2014. The market price of soybeans on November 1, 2013 was $5.00 per bushel.
1. Make the adjusting journal entry necessary on December 31, 2013, if the market price of soybeans is $4.75 per bushel on that date.
2. Make the adjusting journal entry necessary on December 31, 2013, if the market price of soybeans is $5.20 per bushel on that date.