A Company Carries Inventory at a Cost of $400,000

A company carries inventory at a cost of $400,000. When the inventory has a market value of $405,000, the company takes a short position in futures, at a price of $405,500. The futures position is a fair value hedge of the inventory. By the end of the year, the market price of the inventory is $404,000 and the futures price is $404,900. The company still holds the short position. The inventory is reported on the balance sheet at what amount?

A) $404,000
B) $399,000
C) $399,400
D) $404,900