Barnes Company Entered into a Forward Contract During the Current

question 29

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:

Senior Management

The highest level of executives who are responsible for the overall management and strategic direction of a company.

Significant Downsizing

A strategic reduction in a company's workforce to improve efficiency or reduce costs.

Fixed Costs

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance.

Discounted Cash Flow (DCF)

A valuation method used to estimate the value of an investment based on its future cash flows, adjusted for the time value of money.