Question

A firm carries a commodity inventory at a cost of $750,000 and plans to sell it in 60 days. Its market value is currently $800,000. To hedge against a decline in value of the commodity, the company sells commodity futures for delivery in 60 days at a price of $800,000. There is no margin deposit. At the company's 2020 year-end, 30 days later, the 30-day futures price is $780,000 and the inventory value declined to $779,000. Income effects of the inventory and the futures are reported in cost of goods sold.

What is the net effect of value changes in the futures and the inventory on cost of goods sold?
Select one:
A. Increase $1,000
B. Increase $21,000
C. Decrease $1,000

A company uses futures to hedge a firm commitment to buy inventory. Which statement is true concerning the hedge?
Select one:
A. The company takes a short position in futures and records changes in their value in OCI.
B. The company takes a long position in futures and records changes in their value in income.
C. The company takes a short position in futures and records changes in their value in income.

The proprietary funds operating statement reports:
Select one:
B. Accrued interest revenue.
C. Proceeds from sale of property.
D. Payments of principal on long-term debt.

At the beginning of the year, a capital projects fund purchases $4 million in equipment for cash. The equipment has a 10-year life, straight-line.
A year-end, this purchase reduces the capital projects fund's fund balance by
Select one:
A. $4 million.
B. $400,000.
C. $3.6 million.
D. No effect.

A city has a special revenue fund that reports cash of $100,000, inventories of $25,000, and accounts payable of $60,000. The resources for the fund are provided by a county grant.
How is fund balance reported for the special revenue fund?
Select one:
A. Committed, $65,000
C. Nonspendable, $25,000; restricted, $40,000
D. Restricted, $65,000