12.

On July 1 Toto Company has 10,000 tons of megalith in inventory, which is on the company's balance sheet at an average cost of $500.00 per ton. The company has a calendar fiscal year, and prepares complete financial statements on a quarterly basis. Fiscal quarters end on the last day of March, June, September, and December. The company sells futures contracts with a total notional amount equal to the company's inventory on July 1 . The NYMEX (a futures exchange) facilitates trading in commodity futures contracts on megalith. Each contract has notional amount of 100 metric tons of megalith, and has a $1,000 margin requirement per contract, which must be maintained at each settlement date. Data on spot and futures prices (per ton) are provided below: The company settles its futures contracts on the last day of the month, and the contracts expire on September 30 . The company withdraws any excess margin from the margin account on the last day of every month. On October 1 the company sells the entire inventory at the spot price on that day, which is the same as the spot price on the previous day. The company designates the futures contracts as a cash flow hedge of the anticipated sale of its inventory (i.e. it is hedging changes in the cash flows from the planned sale of the inventory). At inception, the hedge qualifies as a cash flow hedge and is anticipated to be highly effective. What is gain or loss from this transaction that the company will report for the period July 1 - July 31