Accounting for fair value hedge of inventory (no ineffectiveness in the hedge)

Our company reports commodities inventory on our balance sheet at $1 million. The inventory has a fair value of $1.1 million and we are concerned about a forecasted decline in the commodity price. We purchase a financial derivative in order to mitigate this risk. On the last day of the period, the fair value of the inventory has declined by $25,000 and the fair value of the derivative has increased by $25,000. All of the inventory is sold at its fair value and the derivative is settled on the last day of the period. Complete the following table of the required journal entries during the period:

Use a negative sign with your answers to indicate a credit entry.

quesnoN 5 Not changed sinoe iastamemp: Marined auUuo 7 Flag question Accounting for fair value hedge of Inventory [no lnefl'ectlveness In the hedge} Our company reports commodities inventory on our balance sheet at $1 million. The inventory has a fair value of $1.1 million and we are concerned about a forecasted decline in the commodity price. We purchase a nancial derivative in order to mitigate this risk On the last day ofthe period, the fair value of the inventory has declined by $25,000 and the fair value of the derivative has increased by $25,000 All ofthe invennory is sold at its fair value and the derivative is settled on the last day ofthe period. Complete the following table ofthe required journal entries during the period: Use a negative sign with your answers to indicate a credit entry. Cull Delhi-le Imam E-nllgl Recognize the change in (he fairvalue ofthe derivative 5 s 5 5 Recognize the change in (hE fairvalue ofthe inventory Recognize revenue from the sale Recognize cost ofgoods sold relating to the sale Recognize settlement ofthe derivative TM. 5 s s s