Partridge Ltd holds a well-diversified portfolio of shares with a current market value on 1 April 2004 of $1 million. On this date Partridge Ltd decides to hedge the portfolio by taking a sell position in fifteen SPI futures units. The All Ordinaries SPI is 3,130 on 1 April 2004. A unit contract in SPI futures is priced based on All Ordinaries SPI and a price of $25. The futures broker requires a deposit of $80,000. On 30 June the All Ordinaries SPI has fallen to 2,980 and the value of the company's share portfolio has fallen to $950,000. On 1 July 2004 Partridge Ltd decides to sell its shares and close out its futures contract. At this date the portfolio has a market value of $925,000 and the All Ordinaries SPI is 2,900. Assume all entries have been made to mark to market the futures contract and record changes in the deposit up to 1 July. What are the entries to record the transactions of 1 July 2004 (only)?
A.

B.

C.

D.

E. None of the given answers.

Question

Partridge Ltd holds a well-diversified portfolio of shares with a current market value on 1 April 2004 of $1 million. On this date Partridge Ltd decides to hedge the portfolio by taking a sell position in fifteen SPI futures units. The All Ordinaries SPI is 3,130 on 1 April 2004. A unit contract in SPI futures is priced based on All Ordinaries SPI and a price of $25. The futures broker requires a deposit of $80,000. On 30 June the All Ordinaries SPI has fallen to 2,980 and the value of the company's share portfolio has fallen to $950,000. On 1 July 2004 Partridge Ltd decides to sell its shares and close out its futures contract. At this date the portfolio has a market value of $925,000 and the All Ordinaries SPI is 2,900. Assume all entries have been made to mark to market the futures contract and record changes in the deposit up to 1 July. What are the entries to record the transactions of 1 July 2004 (only)?
A.
  
B.
  
C.
  
D.
  
E. None of the given answers.

Quizplus · Accepted Answer

The Answer of Partridge Ltd holds a well-diversified portfolio of shares with a current market value on 1 April 2004 of $1 million. On this date Partridge Ltd decides to hedge the portfolio by taking a sell position in fifteen SPI futures units. The All Ordinaries SPI is 3,130 on 1 April 2004. A unit contract in SPI futures is priced based on All Ordinaries SPI and a price of $25. The futures broker requires a deposit of $80,000. On 30 June the All Ordinaries SPI has fallen to 2,980 and the value of the company's share portfolio has fallen to $950,000. On 1 July 2004 Partridge Ltd decides to sell its shares and close out its futures contract. At this date the portfolio has a market value of $925,000 and the All Ordinaries SPI is 2,900. Assume all entries have been made to mark to market the futures contract and record changes in the deposit up to 1 July. What are the entries to record the transactions of 1 July 2004 (only)?
A.
  
B.
  
C.
  
D.
  
E. None of the given answers.

Partridge Ltd Holds a Well-Diversified Portfolio of Shares with a Current