Arlington Steel Company is a producer of raw steel and steel$-$related products.

On January $3,2025,$ Arlington enters into a firm commitment to purchase $10,000$ tons of iron ore pellets from a supplier to satisfy spring production demands. The purchase is to be at a fixed price of $$63$ per ton on April $30,2025.$

To protect against the risk of changes in the fair value of the commitment contract, Arlington enters into a futures contract to sell $10,000$ tons of iron ore on April $30$ for $$63$ per ton $($the current price$).$

The contract calls for net cash settlement, and the company must report changes in the fair values of its hedging instruments each quarter. On March $31,$ the price of iron ore fell to $$61$ per ton, and then to $$60$ per ton on April $30.$

Required:

Calculate the net cash settlement at April $30,2025.$

Prepare the journal entries for the period January $3$ to April $30,2025,$ to record the firm commitment, necessary adjustments for changes in fair value, and settlement of the futures contract.

Complete this question by entering your answers in the tabs below.

Prepare the journal entries for the period January $3$ to April $30,2025,$ to record the firm commitment, necessary adjustments for changes in fair value, and settlement of the futures contract.

Note: If no entry is requirred for a transaction$/$event$,$ select $"$No journal entry required" in the first account field.

Journal entry worksheet

$1$

$2$

$3$

$4$

$5$

$6$

$7$

Record the firm commitment to purchase $10,000$ tons of iron ore pellets from a supplier to satisfy spring production demands