Barnes Company Entered into a Forward Contract During the Current

question 17

Multiple Choice

Barnes Company entered into a forward contract during the current year to hedge the risk of a material supply cost increase.Based on the current market,at year-end the present value of the estimated amount they will have to pay in ten months is $750,000.What entry would be recorded at year-end closing,assuming that no amount was recorded for this contract until this time?

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Definitions:

Assembly Department

A section within a manufacturing facility where components are assembled into finished products, an essential part of the production process.

First-In, First-Out Method

An inventory valuation method that assumes the first items acquired are the first ones sold, which is often used to calculate cost of goods sold.

Process Costing

A costing method used in manufacturing where costs are allocated to batches or process levels, suitable for standardized products.

Work in Process Inventory

The value of unfinished goods in the production process at a specific point in time.