On May 1, 2020, Northern Refining Corp. (NRC) entered into a contract to purchase 80,000 barrels of Brent crude oil at $41 per barrel. NRC took delivery of 40,000 barrels on June 15 when the price for immediate delivery (spot price) of Brent crude oil was $42 per barrel. NRC had not yet taken delivery of the remaining barrels by its June 30, 2020 year end. The spot price on June 30, 2020, was $37 per barrel. Refining costs are $25 per barrel, and the refined product can be sold for $63 per barrel. NRC uses IFRS for reporting its financial results. What amount should NRC recognize as a provision for this contract? Assume that the time value of money element is immaterial.

Question 12 options:

a)

$120,000

b)

$240,000

c)

$160,000

d)	No provision is required for this contract.