On December 1, 2020, Metallic Wonders Corporation has an inventory of metals carried at a cost of$1,000,000. The company plans to sell the inventory in about 60 days, and wishes to guarantee the current60day futures price of $1,400,000. On December 1, 2020, it takes a $1,400,000 short position in metal futures for delivery in 60 days. No margin deposit is required. The futures position is a qualified fair value hedge of the inventory, and the company elects to use hedge accounting. The company closes its futures position on January 31, 2021, and sells the metals on the spot market on February 5, 2021. The companys accounting year ends December 31.

Spot and futures prices for the inventory are:

Spot price Futures price for delivery on January 31, 2021

December 1, 2020 ......................... $1,340,000.....$1,400,000

December 31, 2020 ........................ 1,245,000... 1,310,000

January 31, 2021 .......................... 1,200,000..... 1,200,000

February 5, 2021 .......................... 1,290,000....... N/A

2. At what amount is the investment in futures reported on Metallic Wonders December 31, 2020, balance

sheet?

a. $90,000 liability

b. $95,000 asset

c. $95,000 liability

d. $90,000 asset