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A firm carries a commodity inventory at a cost of $750,000 and plans to sell it in 60 days. Its market value is currently $800,000. To hedge against a decline in value of the commodity, the company sells commodity futures for delivery in 60 days at a price of $800,000. There is no margin deposit. At the company's 2020 year-end, 30 days later, the 30-day futures price is $780,000 and the inventory value declined to $779,000. Income effects of the inventory and the futures are reported in cost of goods sold.
-What is the net effect of value changes in the futures and the inventory on cost of goods sold?

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Quizplus · Accepted Answer

($800,000 - $779,000) - ($800,000 - $780,000) = $1,000

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