During the 1990's, Golden Inc

question 29

Essay

During the 1990's, Golden Inc. entered into long-term contracts with corporate customers to supply one million ounces of ore for $100 an ounce over the next 5 years. During the following years, the price of ore increased to $175 an ounce, which Golden Inc., because it did not hedge the price, would have to pay in order to meet its sales contracts. Although Golden Inc.'s auditor argued that a $75 million loss and liability should be recognized, Golden Inc. stated that the amount of the loss cannot be reasonably estimated prior to the results of renegotiations it was conducting with its corporate customers. Golden Inc. expected to renegotiate an increase in the initial contract price of $100 or reduce the amount of ounces to be delivered under the long-term sales contract. Defend a position of how the long-term contract should be treated from an accounting perspective.

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Definitions:

Peritubular Capillaries

Tiny blood vessels that surround the tubules in the kidney where exchange of substances between the blood and tubules occurs.

Uric Acid

A waste product formed from the breakdown of purines in the body, which is excreted in urine. High levels may lead to gout or kidney stones.

Freshwater Fishes

Fish species that live in bodies of freshwater like rivers, lakes, and ponds, as opposed to saltwater habitats.

Nitrogenous Wastes

Waste products that contain nitrogen, such as urea and ammonia, resulting from the metabolism of proteins.