A large agribusiness firm has contracted to deliver 100,000 bushels of wheat for $8.50 a bushel at the end of October. On the delivery date, the spot price of wheat is $8.70 per bushel. Which of the following is true? a. the buyer of the contract has a 20,000 loss b. the buyer of the contract has a 20,000 profit c. the seller of the contract has 20,000 profit
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A large agribusiness firm has contracted to deliver 100,000 bushels of wheat for $8.50 a bushel at the end of October. On the delivery date, the spot price of wheat is $8.70 per bushel. Which of the following is true?
a. the buyer of the contract has a 20,000 loss
b. the buyer of the contract has a 20,000 profit
c. the seller of the contract has 20,000 profit
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Solved in 2 steps
- Assume that in March a farmer and a baker enter into a forward contract on 100,000 bushels of wheat at a price of $5 per bushel for delivery in September. In September the spot price of wheat is $5.2 per bushel. Who has profited from entering into the forward contract, by how much?Explain who will be at profit and who will lost based on the situation belowand show the calculation. Given that in May a farmer and a baker enter into a forward contract on a thousand bushels of wheat at a price of $5.00 per bushel for delivery in December. In December the spot price of wheat is $4.00 per bushel.A grocery store chain and a farmer enter a forward contract for 10,000 bushels of wheat. The contract expires 3 months from today, and the store chain agrees to pay $7.50 per bushel. If the wheat price increases to $8.15 per bushel by contract expiration, calculate profit/loss for each party.
- A farmer wants to sell future harvest of wheat at the current rate of Rs.18, but he fears that the wheat prices might fall in the next 3 months. In this case, he enters a contract with a grocery store for selling them 1000kgs of wheat at Rs.18 in 3 months. Draw the pay-off chart for the farmer.Connie Is a purchasing assistant for Sabre Manufacturing. She has received quotes from two different suppliers for a shipment of aluminum. Supplier Ns quote Is for $68,808.55 with payment due In 90 days Supplier B will offer the same product, but requires full payment In 15 days lien other terms are the same, below what price would Supplier B's quote need to be In order for to be selected If Sabre pays an Interest rate of 8.25% on Its One of credit with the bank, (Use 365 days a year. Round your answer to 2 decimal places.)A company enters into a contract to sell 50 products to a customer for $30 each. After the company transfers 30 of the 50 products, the customer wants an additional 25 products. The contract is modified and the additional 25 products are priced at $15 each, a price that is not reflective of the standalone selling price. What is the price per product for the remaining 45 products (20 products from the original contract and 25 products from the modification)? $30 for the remaining 20 products from the original contract and $15 for the additional 25 products from the modification. $22.50, the blended price for the remaining products. $21.67, the blended price for the products from the original contract and the modification. O $15, the price for the products specified in the contract modification.
- What is the transaction price for the following scenario: Scenario A: Tula Inc. sells $20,000 of inventory for $45,000 during the year. Tula estimates returns to be 4% of sales. Scenario B: Universe enters into a contract with a new customer for $12,000. As part of this agreement, Universe agrees to pay $4,000 to the customer to compensate the customer for up-front processing costs. A: $43,200 B: $8,000 A: $43,200 B: $12,000 A: $45,000 B: $8,000 A: $45,000 B: $12,000 None of the aboveYou go short the soybean market 2 contracts on March 1 at a price of $11.58, on May 15 you offset for $11.47. Did you make or lose money and how much? You go long the corn market 5 contracts on Dec 1 at a price of $3.96, on March 15 you offset for $3.85. Did you make or lose money and how much?Velocity, a consulting firm, enters into a contract to help Burger Boy, a fast-food restaurant, design a marketingstrategy to compete with Burger King. The contract spans eight months. Burger Boy promises to pay $60,000at the beginning of each month. At the end of the contract, Velocity either will give Burger Boy a refund of$20,000 or will be entitled to an additional $20,000 bonus, depending on whether sales at Burger Boy at yearend have increased to a target level. At the inception of the contract, Velocity estimates an 80% chance that itwill earn the $20,000 bonus and calculates the contract price based on the expected value of future paymentsto be received. After four months, circumstances change, and Velocity revises to 60% its estimate of the probability that it will earn the bonus. At the end of the contract, Velocity receives the additional consideration of$20,000.Required:1. Prepare the journal entry to record revenue each month for the first four months of the contract.2.…
- If a firm have contract with customer, they will deliver their goods in one year after every three Months, contract worth 50,000 if first bundle delivered to customer then calculate revenue and liabilitiesSwenson Oil & Gas allows its customers to prepurchase heating oil in June for the coming winter. Customers who took advantage of the offer prepurchased 400,000 gallons of oil at $3.00 per gallon. Swenson hedged its position by contracting to purchase 400,000 gallons of oil for November delivery at a price of $2.50 per gallon. If the November spot price is $2.25 per gallon, the gross profit to Swenson in June will be a. 0 b. 100,000 c. 200,000 d. (100,000)Westinghouse Company, a producer of washing machines, sells various customers. It has a contract to deliver 10 fully automatic washing machines to Soft and Wash Company for a total price of P400,000. The contract contains a clause for free repairs and maintenance services for a period of two years from date of purchase. Soft & Wash paid 50% of the price and half after 3 months. 1. How much sales revenue vill be recognized by Westinghouse on this sale? P400,000 b. P100,000 а. C. P200,000 d. No revenue