INTER. ACCOUNTING - CONNECT+ALEKS ACCESS
10th Edition
ISBN: 9781264770335
Author: SPICELAND
Publisher: MCG
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Snackums, Incorporated, purchases wheat for use in its food manufacturing process. Snackums operates in a highly competitive industry and is rarely able to increase its sales
price. On January 1, 2024, Snackums estimates that it only has enough wheat inventory to meet its manufacturing needs for the first half of 2024, and forecasts the purchase of
20,000 bushels of wheat on June 30, 2024, from its supplier, Trigo Farms. Because Snackums is concerned that the price of wheat will increase during the coming months it
enters into four June wheat futures contracts on January 1, 2024, to purchase wheat. Each futures contract is based on the purchase of 5,000 bushels of wheat at $6.73 per
bushel on June 30, 2024, and will settle in cash at maturity. (For purposes of this problem, the current spot price is also $6.73 per bushel.) The company must report changes in
the fair value of its hedging instruments each quarter. The fair value of the futures contract at inception is zero. Snackums…
Suppose the forward contract is entered into at the price computed is $365.42 and 4 months later, the price of the asset is $325.45. The investor would like to evaluate her position with respect to any gain or loss accrued on the forward contract. The market value of the forward contract at this point in time from the perspective of the investor would be:
a. -$39.97
b. -$19.57
c. $9.63
d. $19.57
On November 1, 2021 Jeremiah corp,
signed a noncancellable purchase
commitment with its main supplier to
purchase $900,000 of raw materials
on March 1, 2022. By december 31,
2021, the raw materials under this
contract had a market value of
$890,000. On the march 1 purchase
date, the market price was $850,000.
Prepare the journal entries if needed
on
Nov 1 900,000
dec 31 890,000
march 1 850,000
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- On October 6, 2018, the Elgin Corporation signed a purchase commitment to purchase inventory for $60,000on or before March 31, 2019. The company’s fiscal year-end is December 31. The contract was exercised onMarch 21, 2019, and the inventory was purchased for cash at the contract price. On the purchase date of March21, the market price of the inventory was $54,000. The market price of the inventory on December 31, 2018, was$56,000. The company uses a perpetual inventory system.Required:1. Prepare the necessary adjusting journal entry (if any is required) on December 31, 2018.2. Prepare the journal entry to record the purchase on March 21, 2019arrow_forwardCurrent Attempt in Progress Carla Vista Co. enters into a contract to sell Product A and Product B on January 2, 2023, for an upfront cash payment of $170,000. Product A will be delivered in two years (January 2, 2025) and Product B will be delivered in five years (January 2, 2028). Carla Vista allocates the $170,000 to Products A and B on a relative stand-alone selling price basis as follows. Stand-Alone Selling Prices Percentage Allocated Allocated Amounts Product A $36,000 20% $34,000 Product B 144,000 80% 136,000 $180,000 $170,000 Carla Vista uses an interest rate of 5%, which is its incremental borrowing rate.arrow_forwardInventory Write-Down The inventory records of Frost Company for the years 2019 and 2020 reveal the cost and market of the January 1, 2019, inventory to be 125,000. On December 31, 2019, the cost of inventory was 130,000, while the market value was only 128,000. The December 31, 2020, market value of inventory was 140,000, and the cost was only 135,000. Frost uses a perpetual inventory system. Required: 1. Assume the inventory that existed at the end of 2019 was sold in 2020. Prepare the journal entries at the end of 2019 and 2020 to record the lower of cost or net realizable value under the: a. allowance method b. direct method 2. Show the presentation of cost of goods sold and inventory of Frosts income statement and balance sheet for 2019 and 2020 under the: a. allowance method (assume the cost of goods sold prior to applying the lower of cost or net realizable value rule was 595,000 and 605,000 for 2019 and 2020, respectively) b. direct methodarrow_forward
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