On September 23, Gensil Company Buys 40 Contracts on the Chicago

question 26

Essay

On September 23, Gensil Company buys 40 contracts on the Chicago Board of Trade to deliver orange juice to a certified warehouse in November. Each contract is in units of 15,000 pounds at a futures price of $0.851 per pound. The initial margin on the contract is set at $18,000, with a maintenance margin of $14,000. The futures prices are as follows:
Required:
a.Journalize the entries for Gensil Company for the first three days of the contract.
b.What is meant by the maintenance margin and how could it affect Gensil Company?

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Definitions:

Expected Loss

The anticipated amount of loss a business might suffer due to risks identified in its operations or investments.

Secure Neighborhood

An area or community characterized by enhanced safety measures and low crime rates, providing a feeling of security for its residents.

Insurance Premium

The amount of money charged by an insurance company for coverage, calculated based on the risk profile of the insured entity or property.

Insurance Company

A financial institution that provides various types of insurance policies to protect individuals and businesses against risk.