Use of futures contracts to hedge a forecasted transactioncash flow hedge As of January, our company plans to purchase 200,000 lbs of copper on May 31 at the prevailing spot rate To hedge this forecasted transaction, we purchase May futures contracts in January for 200,000 lbs of copper at the futures price of $1 58 lb On May 31, we close out our futures contracts by entering into an offsetting contract in which we agree to buy 200,000 lbs of May copper futures contracts at $1 84 lb , the spot rate on that date We also purchase 200,000 lbs of copper at $1 84 lb on that date Finally, we sell the inventory in June for $2 06 lb Our company operates on a calendar year and issues financial statements quarterly Following are futures and spot prices for the relevant dates Date Spot Futures January $1 44 $1 58 March 31 $1 52 $1 67 May 1 $1 84 n a Required Prepare the journal entries to record the following (If no entry is required, select No entry required for both the debit and credit account titles ) a Purchase of copper futures contract in January General Journal Date Description Debit Credit January Answer No entry required CashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory 0 0 Answer No entry required CashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory 0 0 b Adjusting entry at March 31 March 31 AnswerNo entry requiredCashInventory Futures contract Accounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory 18,000 Answer AnswerNo entry requiredCashInventoryFutures contractAccounts payable Other comprehensive income SalesCost of goods soldGain on InventoryLoss on inventory Answer 18,000c Purchase of copper on May 31 May 31 AnswerNo entry requiredCashI nventory Futures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory 368000 Answer AnswerNo entry required Cash InventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory Answer 368000 To record inventory purchase May 31 AnswerNo entry required Cash InventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory 52000 Answer AnswerNo entry requiredCashInventory Futures contrac tAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory Answer 18000 Other comprehensive income Answer 34000 To close out futures contract d Sale of copper on June 1 June 1 Cash 412000 Answer AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSales Cost of goods sold Gain on InventoryLoss on inventory Answer Sales Answer 412000 AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on Inventory Loss on inventory Answer To record the sale of copper June 1 AnswerNo entry requiredCashInventoryFutures contractAccounts payable Other comprehensive income SalesCost of goods soldGain on InventoryLoss on inventory Answer AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSales Cost of goods sold Gain on InventoryLoss on inventory Answer To recognize deferred gain I have all the answers for the journal entries bolded, also most entries numbers answered I only need the question marks which are in part d for cogs inventory oci cogs Thanks

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Use of futures contracts to hedge a forecasted transactioncash flow hedge As of January, our company plans to purchase 200,000 lbs. of copper on May

Use of futures contracts to hedge a forecasted transactioncash flow hedge

As of January, our company plans to purchase 200,000 lbs. of copper on May 31 at the prevailing spot rate. To hedge this forecasted transaction, we purchase May futures contracts in January for 200,000 lbs. of copper at the futures price of $1.58/lb. On May 31, we close out our futures contracts by entering into an offsetting contract in which we agree to buy 200,000 lbs. of May copper futures contracts at $1.84/lb., the spot rate on that date. We also purchase 200,000 lbs. of copper at $1.84/lb. on that date. Finally, we sell the inventory in June for $2.06/lb. Our company operates on a calendar year and issues financial statements quarterly.

Following are futures and spot prices for the relevant dates:

Date	Spot	Futures
January	$1.44	$1.58
March 31	$1.52	$1.67
May 1	$1.84	n/a

Required Prepare the journal entries to record the following: (If no entry is required, select "No entry required" for both the debit and credit account titles.)

a. Purchase of copper futures contract in January

General Journal
Date	Description	Debit	Credit
January	AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory	0	0
	AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory	0	0

b. Adjusting entry at March 31

March 31

AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory

18,000

Answer

AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory

Answer

18,000c.

Purchase of copper on May 31

May 31	AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory	368000	Answer
	AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory	Answer	368000
	To record inventory purchase
May 31	AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory	52000	Answer
	AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory	Answer	18000
	Other comprehensive income	Answer	34000
	To close out futures contract

d. Sale of copper on June 1

June 1	Cash	412000	Answer
	AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory	?	Answer
	Sales	Answer	412000
	AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory	Answer	?
	To record the sale of copper
June 1	AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory	?	Answer
	AnswerNo entry requiredCashInventoryFutures contractAccounts payableOther comprehensive incomeSalesCost of goods soldGain on InventoryLoss on inventory	Answer	?
	To recognize deferred gain I have all the answers for the journal entries bolded, also most entries numbers answered. I only need the question marks which are in part d for cogs/inventory/oci/cogs. Thanks.