Uses titanium in the production of its specialty drivers

Assignment Help Financial Management

Reference no: EM13941469

BCC Golf Co. uses titanium in the production of its specialty drivers.

BCC anticipates that it will need to purchase 200 ounces of titanium in November 2014, for clubs that will be shipped in the spring and summer of 2015. However, if the price of titanium increases, this will increase the cost to produce the clubs, which will result in lower profit margins. To hedge the risk of increased titanium prices, on May 1, 2014, BCC enters into a titanium futures contract and designates this futures contract as a cash flow hedge of the anticipated titanium purchase. The notional amount of the contract is 200 ounces, and the terms of the contract give BCC the option to purchase titanium at a price of $500 per ounce. The price will be good until the contract expires on November 30, 2014. Assume the following data with respect to the price of the call options and the titanium inventory purchase. Date Spot Price for November Delivery (Per Oz.) May 1, 2014 $500 June 30, 2014 $520 September 30, 2014 $525 Present the journal entries for the following dates/transactions.

(a) May 1, 2014-Inception of futures contract, no premium paid.

(b) June 30, 2014-BCC prepares financial statements.

(d) October 5, 2014-BCC purchases 200 ounces of titanium at $525 per ounce and settles the futures contract.

(e) December 15, 2014-BCC sells clubs containing titanium purchased in October 2014 for $250,000. The cost of the finished goods inventory is $140,000.

Reference no: EM13941469

Questions Cloud

What is the price per share of firm after the acquisition : Firm A is acquiring Firm B for $25,000 in cash. Firm A has 3,000 shares of stock outstanding at a market value of $21 a share. Firm B has 1,200 shares of stock outstanding at a market price of $17 a share. Neither firm has any debt. The net present v..

A loan is to be repaid in level instalments payable : A loan is to be repaid in level instalments payable at the end of each year for 7 years. The effective annual interest rate on the loan is 4%. After the 4th payment the principal remaining is $5000. Find the amount of the loan.

What is the overall completion percentage for wip : What is the overall completion percentage for WIP as to direct materials at the end of the period?

Differentiate peacemaking and deontological philosophy : Obviously, both of these cases fell under the Capital Murder statutes of both states. Differentiate the peacemaking philosophy and deontological philosophy in the context of capital murder sentencing for juveniles?

Uses titanium in the production of its specialty drivers : BCC Golf Co. uses titanium in the production of its specialty drivers. BCC anticipates that it will need to purchase 200 ounces of titanium in November 2014, for clubs that will be shipped in the spring and summer of 2015. However, if the price of ti..

Determine the economic consequences for this performance : Speculate how commercial banks will perform overall throughout the next three years as the economy rebounds. Then determine the economic consequences for this performance.

Find the total and unit cost of finished goods : Find the total and unit cost of finished goods started and completed in the current period. Find the total cost of work in process inventory at June 30.

Prepare a report on your testing findings : Carry out a test on www.hi5.com web site. Carry out the test and prepare for the report

Both bonds make semiannual payments : Dinklage Corp. has 5 million shares of common stock outstanding. The current share price is $77, and the book value per share is $8. The company also has two bond issues outstanding. Assume that the overall cost of debt is the weighted average of tha..

User Account

All Pages