Jefferson Company Entered into a Forward Contract with Washington Company

question 33

Essay

Jefferson Company entered into a forward contract with Washington Company on October 1,2011,under which Jefferson agreed to buy (and Washington agreed to sell)10,000 tons of coal at $80.00 per ton in 90 days.On October 1,2011,the price of coal is $82.00 per ton.On December 29,2011,the price of coal is $85.00 per ton.The contract allows for net settlement.
Required:
Determine the net settlement on the forward contract.

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Definitions:

Transactions

The exchange of goods, services, or funds between two or more parties, forming the basic activities recorded in accounting.

Parking Lot Cleaning

The service of removing trash, debris, and sometimes snow from outdoor parking areas to maintain cleanliness and safety.

Gas & Electric Company

A utility company providing natural gas and electricity services to residential, commercial, and industrial customers.

Accounting Equation

Formula that represents the relationship between the assets, liabilities, and owner's equity of a company: Assets = Liabilities + Owner’s Equity.