Jenson Company Buys 20 Contracts on the Chicago Board of Trade

question 16

Multiple Choice

Jenson Company buys 20 contracts on the Chicago Board of Trade to receive October delivery of soybeans to a certified warehouse.Each contract is in units of 3,000 bushels at a futures price of $2.75 per bushel.The owner of the contract requires a margin account with an initial margin of $8,000, with a maintenance margin of $6,000.What entry will Jenson Company make to establish the margin account?

• A) A memo entry to record acquisition of the contract which has no value at inception.
• B)\(\begin{array}{llr}
• \text { Futures contract - margin account } &6,000\\
• \text { Cash } &&6,000\\
• \end{array}\)
• C)\(\begin{array}{ll}
• \text { Futures contract - margin account } & 8,000 \\
• \text { Cash } && 8,000
• \end{array}\)
• D)\(\begin{array}{ll}
• \text { Futures contract - margin account } & 165,000 \\
• \text { Cash } && 165,000
• \end{array}\)