Sutton Mirrors uses silver to produce its mirrors. Sutton anticipates it will need to purchase 1.000 kilograms of siver in July 2022 to make enough mirrors to meet its fourth quarter sales demand. 3A points To hedge against the risk of rising silver prices on June 1, 2022, Sutton enters into a forward contract with a third-party intermediary to buy 1.000 kilograms of silver at the current spot price of 5500 per kilogram. It designates the contract as a cash flow hedge of the anticipated silver purchase. The contract will settle by an exchange of cash with the intermediary based on the spot price on the settlement date. On July 1, 2022 the price of silver was $530 per kilogram, and on that date Sutton purchased 1.000 kilograms of silver and settled the forward contract. Subsequently Sutton used the purchased silver to make mirrors. Sutton sold its mirrors during the fourth quarter of 2022 for $1.500.000, and the total value of the inventory, which includes the cost of the silver purchase made on July 1, 2022 is 5800.000. After taking into account the effect of the cash flow hedge the cost of goods sold for the fourth quarter sales would be: 5770.000 500.000 51,470,000 $2.000