A firm carries a commodity inventory at a cost of $750,000 and plans to sell it in 60 days. Its market value is currently $800,000. To hedge against a decline in value of the commodity, the company sells commodity futures for delivery in 60 days at a price of $800,000. There is no margin deposit. At the company's 2020 year- end, 30 days later, the 30-day futures price is $780,000 and the inventory value declined to $779,000. Income effects of the inventory and the futures are reported in cost of goods sold. How are the futures reported on the company's year-end balance sheet? O a. $21,000 asset O b. $21,000 liability O c. $20,000 liability O d. $20,000 asset A donor contributed $1,000,000 in cash to the American Red Cross in 2017. The donor specified that the contribution be held as a permanent endowment, and income from related investments be used to help victims of earthquakes. The Red Cross invested the $1,000,000 in securities in 2017. During 2018, dividend income of $100,000 was earned, but none of it was used for earthquake relief. How did the Red Cross report this on its 2018 statement of activities? O a. $100,000 increase in temporarily restricted net assets; $100,000 decrease in temporarily restricted net assets and $100,000 increase in unrestricted net assets for net assets released from use restrictions O b. $100,000 increase in permanently restricted net assets Oc. $100,000 increase in temporarily restricted net assets O d. $100,000 increase in unrestricted net assets, $1,000,000 decrease in permanently restricted net assets NFP organizations like the Red Cross invest in derivatives to hedge their financial risks. How do the accounting standards for NFP hedge investments differ from the accounting standards for other NFP investments? O a. Unrealized gains and losses on hedge investments are not reported, while unrealized gains and losses on other investments are reported as a change in unrestricted net assets. O b. Unrealized gains and losses on hedge investments are deferred on the balance sheet until the hedged item is reported on the statement of activities, while unrealized gains and losses on other investments are reported as change in unrestricted net assets. O C. There is no difference. O d. Unrealized gains and losses on hedge investments are reported as changes in permanently restricted net assets, while unrealized gains and losses on other investments are not reported The American National Red Cross reports the following expenses: Biomedical services Nonoperating gains Fund-raising expenses Management and general travel and maintenance Domestic disaster services International relief and development services $ 46,000,000 12,000,000 183,000,000 3,000,000 364,000,000 127,000,000 On its statement of activities, the Red Cross reports program expenses of a. $537,000,000 O b. $552,000,000 Oc. $491,000,000 O d. $549,000,000
