One orange juice futures contract is on 15,000 pounds of frozen concentrate. Suppose that in September 2014
Question:
One orange juice futures contract is on 15,000 pounds of frozen concentrate. Suppose that in September 2014 a company sells a March 2016 orange juice futures contract for 120 cents per pound. In December 2014, the futures price is 140 cents; in December 2015, it is 110 cents; and in February 2016, it is closed out at 125 cents. The company has a December year end. What is the company's profit or loss on the contract? How is it realized? What is the accounting and tax treatment of the transaction if the company is classified as
(a) a hedger and
(b) a speculator?
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To calculate the profit or loss on the orange juice futures contract we need to consider the differe...View the full answer
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