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Hedging Transactions On September 30, we enter into a futures contract to hedge the value of gold which we will use in our manufacturing process

Hedging Transactions

On September 30, we enter into a futures contract to hedge the value of gold which we will use in our manufacturing process and report on our balance sheet at $500,000. On December 31, the market value of gold has declined to $450,000. However, the futures contract that we had purchased increased in value by $45,000:

1. How much net profit or loss will we recognize?

2. Will this profit or loss be reflected in net income or other comprehensive income?

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