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Suppose that, on October 24, 2022, a company sells one April 2023 live cattle futures contract. It closes out its position on January 21, 2023. The futures price (per pound) is 121.20 cents when it enters into the contract, 118.30 cents when it closes out its position, and 118.80 cents at the end of December 2022. One contract is for the delivery of 40,000 pounds of cattle. What is the total profit? How is it

Suppose that, on October 24, 2022, a company sells one April 2023 live cattle futures contract. It closes out its position on January 21, 2023. The futures price (per pound) is 121.20 cents when it enters into the contract, 118.30 cents when it closes out its position, and 118.80 cents at the end of December 2022. One contract is for the delivery of 40,000 pounds of cattle. What is the total profit? How is it

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Suppose that, on October 24, 2022, a company sells one April 2023 live cattle futures contract. It closes out its position on January 21, 2023. The futures price (per pound) is 121.20 cents when it enters into the contract, 118.30 cents when it closes out its position, and 118.80 cents at the end of December 2022. One contract is for the delivery of 40,000 pounds of cattle. What is the total profit? How is it taxed if the company is (a) a hedger and (b) a speculator? Assume that the company has a December 31 year end
Transcribed Image Text:Suppose that, on October 24, 2022, a company sells one April 2023 live cattle futures contract. It closes out its position on January 21, 2023. The futures price (per pound) is 121.20 cents when it enters into the contract, 118.30 cents when it closes out its position, and 118.80 cents at the end of December 2022. One contract is for the delivery of 40,000 pounds of cattle. What is the total profit? How is it taxed if the company is (a) a hedger and (b) a speculator? Assume that the company has a December 31 year end
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