Forward Contract Trudel Builders Ltd. Uses Fir 2x6 Lumber as Its Framing

question 16

Essay

Forward contract
Trudel Builders Ltd. uses fir 2x6 lumber as its framing material. On November 15, 2020, Trudel enters into a forward contract for 1,500,000 board feet of lumber at $ 0.25 per board foot for March 2021 delivery. At December 31, 2020, the market price for March delivery is $ 0.26. On March 5, 2021, Trudel took delivery of 1,500,000 board feet for $ 0.25 and settled the forward contract. The market rate on this date was $ 0.28 per board foot.
Instructions
Record any required entries related to this contract.

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Definitions:

Materials Spoilage

The portion of raw materials that becomes unusable and is discarded during the production process.

Direct Labor

Labor costs directly attributed to the production of goods or services, such as wages paid to factory workers or assembly line employees.

Direct Materials

Raw materials that can be directly associated with the production of a product and are included in the final product.

Standard Costs

Predetermined or budgeted costs serving as a benchmark for evaluating actual performance and cost control.