Homework Answers
Hi, Pls see below underlined and bold for the answers:
1. The 1st quarter income statement includes unrealised gains of
7000 related
to futures
Reason: Price increased to 67 from 60. The increase is a unrealised gain. Calculation = [ (67-60)x 1000 ]
2. On the balance sheet date futures are recognised as Current Asset (the value is > 60 per barrel)
Reason : Because it is a contractual right. Derivatives that are intended for trading or speculative purposes should be reflected as current assets and liabilities
3. The 3rd quarter income statement includes unrealised loss of 14000 related to futures
Reason: Price decreased to 55 from 69 in June. The increase is a unrealised gain. Calculation = [ (55-69)x 1000 ]
June price has to be considered beacuse, the futures would have been marked to market(MTM) in the month of June.
4. On the balance sheet date futures are recognised as Current liability (the value is < 60 per barrel)
Reason : Because it is a contractual right.Derivatives that are intended for trading or speculative purposes should be reflected as current assets and liabilities
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of Pharoah Company on January 1, 2020, by paying $681,000 for the
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2020. Pharoah reported net income of $398,500 for the year. At
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