Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Smith Company predicts a requirement for 200,000 pounds of cotton in May. On April 11, the company obtains a call option to buy 200,000 pounds of cotton in May at a strike price of $0.3765 per pound for a premium of $814. Spot prices and options values at selected dates are given below:

                                       April 11         April 30         May 3
Spot price per pound           $0.37            $0.38            $0.38
Fair value of option               814             1,137            1,689

Smith Company settled an option on May 3 and purchased 200,000 pounds of cotton on May 17 at a spot price of $0.3840 per pound. In the last half of May and beginning of June the cotton was used to produce cloth. One third of the cloth was sold in June. The change in the option's time value is excluded from the assessment of hedge effectiveness.

problems:

1) Create all journal entries required through June to record above transactions and events.

2) What will the effect on earnings have been if the predicted purchase were not hedged?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M910237

Have any Question? 


Related Questions in Accounting Basics

Accounting assignment1 the standard direct labor time for

Accounting Assignment 1. The standard direct labor time for producing one pair of original Crocs is 0.6 hours and the direct labor rate for producing one pair of original Crocs is $18.50 per hour. During February, 10,000 ...

Assessment-bullassessment instructionspreparationfor this

Assessment- • Assessment Instructions Preparation For this problem, you will need to select a publicly traded company. Once you have selected a publicly traded company, obtain Form 10-K for the company for the most curre ...

Accountingi for the month of january jims landscaping

Accounting I. For the month of January Jim's Landscaping Company has the following transactions: 1. Borrowed $5,000 from First National Bank on a note due in two years. 2. Received $12,500 cash from investors and issued ...

Vaughn company reports the following financial information

Vaughn Company reports the following financial information before adjustments.   Dr. Cr. Accounts Receivable $155,400 Allowance for Doubtful Accounts   $3,890 Sales Revenue (all on credit)   800,700 Sales Returns and All ...

Assessment one - business research report proposal initial

Assessment One - Business Research Report Proposal: Initial Research Proposal The initial research proposal will consist of the following SIX (6) items: 1. Identify a business research topic 2. Define the research questi ...

Question 1you are in charge of giving a trial final exam to

QUESTION 1 You are in charge of giving a trial final exam to classmates. Choose two problems from different areas of financial reporting that you studied in this course. Submit them as your initial post as early as possi ...

This assignment will assess the following learning

This assignment will assess the following learning outcomes: - Demonstrate the impact on the financial statements and the implication for different users of accounts of alternative ways of treating controversial accounti ...

Managerial accounting and financial accountingcompare and

Managerial Accounting and Financial Accounting Compare and Contrast Managerial Accounting and Financial Accounting. Be sure to discuss how managerial accounting is useful for providing information for at least one of the ...

Accountingimagine that you are a consultant working on a

Accounting Imagine that you are a consultant working on a special project to help a company determine techniques that it can use in order to calculate the fair value of investments. From the e-activity, prepare a report ...

Company name bhp billiton - report 2000-2200

Company Name BHP Billiton - Report (2000-2200) words Introduction Approach of research study What they have done wrong which results in the crisis Issues in sustainability report Issues in what they claim of doing but th ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen