ADVANCED ACCOUNTING
ADVANCED ACCOUNTING
12th Edition
ISBN: 9780357671221
Author: FISCHER
Publisher: CENGAGE L
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Chapter 9.M, Problem M.2.2P
To determine

Hedging:

Hedging against an investment risk is termed for strategically implementing the instruments and tools in the market to minimize the risk and effects of any adverse price movements. It can be said that investors are benefitted through hedging as they hedge one investment by making another investment.

The financial instruments like exchange traded funds, stocks, forward contracts, options, insurance, swaps, etc may construct hedge.

Future contracts:

A futures contract is generally an agreement of an asset for either buying or selling on an exchange that is publicly-traded at a decided price at specified time in future.

The identification of factors that cause future contracts not to be effective as compared to a hedge against changes in the price of flour used by CBBI.

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Assume a federal agency has the following events: Receives a warrant from the Treasury notifying the agency of appropriations of $5,350,000. OMB apportions one-fourth of the appropriation for the first quarter of the year. The director of the agency allots $1,202,000 to program units. Program units place orders of $865,000. Supplies ($141,500) and services ($582,500) are received during the first quarter. Supplies of $130,000 were used in the quarter. Accounts payable were paid in full. Required: Prepare a schedule showing the status of the appropriation at the end of the first quarter.
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