Question $4$ of $4$

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Cullumber Inc. entered into a futures contract to sell grain for $$1,140$ in $30$ days. This contract helps the company manage its market risk by locking in the amount it will get when it sells the grain. The contracts trade on an exchange and are net settleable. The broker requires a $$240$ initial margin $($normally a percentage of the market value of the contract or a fixed amount multiplied by the number of contracts$).$ This amount is deposited in cash with the broker. Like the forward, the futures contract would have a zero value up front. This is a non$-$financial derivative because the underlying is a non$-$financial commodity $($grain$).$ Cullumber intends to settle on a net basis. Assume that the value of the grain increases after the contract has been entered into. The contract is marked to market by the broker. Assume that the market value of the contract decreases by $$120.$ The value of the contract has decreased because Cullumber has agreed to sell the grain for a fixed amount that is lower than the current market value. The clearing house then requires Cullumber to deposit an additional $$120.$ The contract is settled on a net basis at the end of the contract. Assume no further changes in value.

Prepare the journal entries to record the remeasurement and the net settlement. $($Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entr is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. List all debit entries before credit entries.$)$

Account Titles and Explanation

Debit

Credit

$($To record the loss$)$