Business, 30.04.2021 18:50, TheMixingToad
American Italian Pasta Company (AIPC) manufactures several varieties of pasta. On January 1, 2020, AIPC had excess commodity inventories carried at acquisition cost of $1,000,000. These commodities could be sold or manufactured into pasta later in the year. To hedge against possible declines in the value of its commodities inventory, on January 6 AIPC sold commodity futures, obligating the company to deliver the commodities in February for $1,100,000. The futures exchange requires a $20,000 margin deposit. On February 19, the futures price increased to $1,150,000 and the company closed out its futures contract. Spot prices continued to rise and AIPC sold its inventory for $1,175,000 in cash on March 2.
Required:
Prepare the journal entries related to AIPC’s futures contract and sale of commodities inventory.
Answers: 2
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American Italian Pasta Company (AIPC) manufactures several varieties of pasta. On January 1, 2020, A...
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