Reference no: EM132812788
Question - On May 1, 2020, XYZ Corp., a lumber wholesaler, placed an order with its supplier for 600,000 board feet (bf) of lumber, to be delivered and paid for on September 30, 2020. At this time, the spot price for 100,000 board feet (the contract size is 100,000 bf) of lumber is $5,000, and the future (forward) price for September 30, 2020 delivery is $5,100 and XYZ decided to enter into 6 forward contracts at 100,000 bf each (at $5,100 per contract) for September 30, 2020 delivery. XYZ has designated the 6 contracts as a cash flow hedge. The contracts further call for a net cash settlement. XYZ's year end is June 30, 2020 and at that date the spot price for a 100,000 bf lumber contract was $5,200, and the future price for 3-month delivery was $5,350.
On September 30, 2020, when the spot lumber price was $5,150, XYZ took delivery of the 6000,000 bf of lumber, paid its supplier and settled the 6 forward contracts.
On October 31, 2020, XYZ sold 300,000 bf of lumber from this delivery to Homes Unlimited for $10,000 per 100,000 bf in cash.
Required - What would the journal entries be for May 1, June 30, September 30 and October 31?
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