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Prepare the journal entry that would be required

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Question - On January 1, 2020, Wildhorse Inc. agrees to buy 3 kg of gold at $38,000 per kilogram from Golden Corp on April 1, 2020, but does not intend to take delivery of the gold. On the day that the contract was entered into, the fair value of this futures contract that trades on the Futures Exchange was zero. On January 1, 2020, Wildhorse is required to deposit $70 with the stockbroker as a margin. The fair value of the futures subsequently fluctuated as follows:

Date Fair Value of Futures Contract

January 20, 2020 $498

February 6, 2020 $123

February 28, 2020 $356

March 14, 2020 $700

On the settlement date, the spot price of gold is $39,000 per kilogram. Assume that Wildhorse complies with IFRS.

Prepare the journal entry for the day the futures contract was signed.

Prepare the journal entries to recognize the changes in the fair value of the futures contract.

Prepare the journal entry that would be required if Wildhorse settled the contract on a net basis on April 1, 2020.

Reference no: EM133013141

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