ABC Co. wishes to purchase 8,000 shares of Happy Go Lucky Ltd., a publicly traded company. ABC contracts to buy the shares from a related party, United Ltd. for $73.00/share in 120 days time. The fair value was $73.00/share on this date. One month later, at year-end, the fair value of the Happy Go Lucky shares is $62.00/share, and it is $68.00/share at the end of 120 days. At that time, the shares are bought, and the contract is closed out.

1. Is this a forward contract or a futures contract? Explain why.
2. What risk is the company hedging? Explain why.
3. Prepare journal entries to record the inception of the contract, the change in fair value at year-end, and its maturity.