On October 5, 2017, Kappa Cloth Ltd

question 45

Short Answer

On October 5, 2017, Kappa Cloth Ltd.enters into a forward contract to purchase 10,000 metres of cotton fabric at $1 per metre, good until February 1, 2018.At December 31, 2017, the forward price for February 2018 delivery of cotton fabric has increased to $1.04 per metre.The adjusting entry at December 31, 2017 would be

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Definitions:

DJIA

The Dow Jones Industrial Average, a stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States.

Risk-free Rate

The return on an investment with zero risk, indicating the interest an investor would expect from an absolutely risk-free investment over a specified period.

Dividend Yield

The dividend per share divided by the price per share, indicating how much cash flow you are getting for each dollar invested in an equity position.

Futures Price

The set price at which an asset will be bought or sold in the future as per the terms of a futures contract.