Question
On January 1, 2020, Cullumber Inc. agrees to buy 3 kg of gold at $33,000 per kilogram from Golden Corp on April 1, 2020, but
On January 1, 2020, Cullumber Inc. agrees to buy 3 kg of gold at $33,000 per kilogram from Golden Corp on April 1, 2020, but does not intend to take delivery of the gold. On the day that the contract was entered into, the fair value of this forward contract was zero. The fair value of the forward subsequently fluctuated as follows:
| Date | Fair Value of Forward Contract | |
|---|---|---|
| January 20, 2020 | $453 | |
| February 6, 2020 | $133 | |
| February 28, 2020 | $378 | |
| March 14, 2020 | $750 |
On the settlement date, the spot price of gold is $34,000 per kilogram. Assume that Cullumber complies with IFRS.
Questions:
a) Prepare the journal entry for the day the forward contract was signed.
b )prepare the journal entries to recognize the changes in the fair value of the forward contract.
c) Prepare the journal entry that would be required if Cullumber settled the contract on a net basis on April 1, 2020
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College Accounting
Authors: Heintz and Parry
20th Edition
1285892070, 538489669, 9781111790301, 978-1285892078, 9780538489669, 1111790302, 978-0538745192
