Accounting for Cash Flow Hedge: Futures Contract Mellogs is a small company that produces corn-based breakfast foods. On November 1, 2020, the company obtains a contract to supply 2 million pounds of its corn-based breakfast product to a large customer based in Germany, with delivery to be made in May 2021. As a result, Mellogs will need to acquire 90,000 bushels of corn in March 2021, in order to fulfill this contract. The price of corn currently at $3.60 per bushel, could increase dramatically between November 1, 2020, and March 2021. As a result, Mellogs entered into a futures contract with Capitol Clearing House Inc. (CCH) to hedge the risk of market price changes of corn. The cost of the fair value hedge (futures contract) is zero. The futures contract provides that Mellogs Company purchases the corn needed at the date needed at market price, but CCH must pay Mellogs Company any differences above $3.60/bushel while Mellogs Company pays to CCH any differences below $3.60/bushel. Assume that the market price of corn is $3.80/bushel on December 31, 2020, and that Mellogs Company purchases the 90,000 bushels on March 3, 2021, for $3.50/bushel. Required Note: If a journal entry (or a line of the journal entry) isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Note: Record any multiple debits in alphabetical order and any multiple credits in alphabetical order. a. Prepare the journal entry required on November 1, 2020, (if any) related to the purchase of the futures contract.

Date	Account	Debit	Credit
Nov. 1, 2020	AnswerCashInventoryCall OptionFutures ContractPut OptionSwapFair Value AdjustmentNote PayableCost of Goods SoldInterest ExpenseUnrealized Gain or Loss OCILoss on Settlement of Call OptionUnrealized Gain or Loss IncomeN/A	Answer	Answer
	AnswerCashInventoryCall OptionFutures ContractPut OptionSwapFair Value AdjustmentNote PayableCost of Goods SoldInterest ExpenseUnrealized Gain or Loss OCILoss on Settlement of Call OptionUnrealized Gain or Loss IncomeN/A	Answer	Answer
	To record purchase of futures contract

b. Prepare the journal entry required on December 31, 2020, (if any) for the futures contract.

Date	Account	Debit	Credit
Dec. 31, 2020	AnswerCashInventoryCall OptionFutures ContractPut OptionSwapFair Value AdjustmentNote PayableCost of Goods SoldInterest ExpenseUnrealized Gain or Loss OCILoss on Settlement of Call OptionUnrealized Gain or Loss IncomeN/A	Answer	Answer
	AnswerCashInventoryCall OptionFutures ContractPut OptionSwapFair Value AdjustmentNote PayableCost of Goods SoldInterest ExpenseUnrealized Gain or Loss OCILoss on Settlement of Call OptionUnrealized Gain or Loss IncomeN/A	Answer	Answer
	To record adjustments to the futures contract

c. Prepare the journal entry required on March 3, 2021, for the execution of the futures contract and purchase of the corn.

Date	Account	Debit	Credit
March 3, 2021	AnswerCashInventoryCall OptionFutures ContractPut OptionSwapFair Value AdjustmentNote PayableCost of Goods SoldInterest ExpenseUnrealized Gain or Loss OCILoss on Settlement of Call OptionUnrealized Gain or Loss IncomeN/A	Answer	Answer
	AnswerCashInventoryCall OptionFutures ContractPut OptionSwapFair Value AdjustmentNote PayableCost of Goods SoldInterest ExpenseUnrealized Gain or Loss OCILoss on Settlement of Call OptionUnrealized Gain or Loss IncomeN/A	Answer	Answer
	To record purchase of corn
March 3, 2021	AnswerCashInventoryCall OptionFutures ContractPut OptionSwapFair Value AdjustmentNote PayableCost of Goods SoldInterest ExpenseUnrealized Gain or Loss OCILoss on Settlement of Call OptionUnrealized Gain or Loss IncomeN/A	Answer	Answer
	AnswerCashInventoryCall OptionFutures ContractPut OptionSwapFair Value AdjustmentNote PayableCost of Goods SoldInterest ExpenseUnrealized Gain or Loss OCILoss on Settlement of Call OptionUnrealized Gain or Loss IncomeN/A	Answer	Answer
	AnswerCashInventoryCall OptionFutures ContractPut OptionSwapFair Value AdjustmentNote PayableCost of Goods SoldInterest ExpenseUnrealized Gain or Loss OCILoss on Settlement of Call OptionUnrealized Gain or Loss IncomeN/A	Answer	Answer
	To record payment to CCH

d. Assuming that the 100,000 bushels of corn were utilized to fulfill the order in May 2021, at what amount is the cost of the corn included in the reported COGS on the sale? $Answer