Blossom Inc. entered into a futures contract to sell grain for $1,120 in 30 days. This contract helps the company manage its market risk by locking in the amount it will get when it sells the grain. The contracts trade on an exchange and are net settleable. The broker requires a $220 initial margin (normally a percentage of the market value of the contract or a fixed amount multiplied by the number of contracts). This amount is deposited in cash with the broker. Like the forward, the futures contract would have a zero value up front. This is a non-financial derivative because the underlying is a non-financial commodity (grain). Blossom intends to settle on a net basis. Prepare the related journal entry at the acquisition date. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Account Titles Debit Credit
Blossom Inc. entered into a futures contract to sell grain for $1,120 in 30 days. This contract helps the company manage its market risk by locking in the amount it will get when it sells the grain. The contracts trade on an exchange and are net settleable. The broker requires a $220 initial margin (normally a percentage of the market value of the contract or a fixed amount multiplied by the number of contracts). This amount is deposited in cash with the broker. Like the forward, the futures contract would have a zero value up front. This is a non-financial derivative because the underlying is a non-financial commodity (grain). Blossom intends to settle on a net basis. Prepare the related journal entry at the acquisition date. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Account Titles Debit Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Blossom Inc. entered into a futures contract to sell grain for $1,120 in 30 days. This contract helps the company manage its market risk
by locking in the amount it will get when it sells the grain. The contracts trade on an exchange and are net settleable. The broker
requires a $220 initial margin (normally a percentage of the market value of the contract or a fixed amount multiplied by the number of
contracts). This amount is deposited in cash with the broker. Like the forward, the futures contract would have a zero value up front.
This is a non-financial derivative because the underlying is a non-financial commodity (grain). Blossom intends to settle on a net basis.
Prepare the related journal entry at the acquisition date. (Credit account titles are automatically indented when the amount is entered. Do
not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit
entry.)
Account Titles
Debit
Credit
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