On January 1, 2020 Beaver Inc. determines that it wants to purchase 2,000 tons of wheat in January 2021. Thus, Beaver Inc. enters into a futures contract that gives Beaver Inc. the right and obligation to purchase 2,000 tons of wheat for $75 per ton. The contract is classified as a cash flow hedge and expires in January 2021.

Required:

1. On January 1, 2020 the market price for a ton of wheat is $75. What journal entry does Beaver Inc. record associated with this hedge on this date?

2. On June 30, 2020 the market price for a ton of wheat is $90. What journal entry does Beaver Inc. record associated with this hedge on this date?

3. On December 31, 2020 the market price for a ton of wheat is $70. What journal entry does Beaver Inc. record associated with this hedge on this date?

4. On January 1, 2021 Beaver Inc. purchases 2,000 tons of wheat at the market price of $70 and settles the hedge. What journal entries does Beaver Inc. record associated with its purchased of wheat and its hedge on this date?