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Problem 17-16 (Part Level Submission) Cullumber Jewelry Co. uses gold in the manufacture of its products. Cullumber anticipates that it will need to purchase 530 ounces of gold in October 2020, for jewelry that will be shipped for the holiday shopping season. However, if the price of gold increases, Cullumber's cost to produce its jewelry will increase, which would reduce its profit margins. To hedge the risk of increased gold prices, on April 1, 2020, Cullumber enters into a gold futures contract and designates this futures contract as a cash flow hedge of the anticipated gold purchase. The notional amount of the contract is 530 ounces, and the terms of the contract give Cullumber the right and the obligation to purchase gold at a price of $290 per ounce. The price will be good until the contract expires on October 31, 2020. Assume the following data with respect to the price of the futures contract and the gold inventory purchase: Date April 1, 2020 June 30, 2020 September 30, 2020 Spot Price for October Delivery $290 per ounce 300 per ounce 306 per ounce (a) to (e) Prepare the journal entries for the following transactions. (a) (b) April 1, 2020-Inception of the futures contract, no premium paid. June 30, 2020-Cullumber Co. prepares financial statements. September 30, 2020-Cullumber Co. prepares financial statements. October 10, 2020-Cullumber Co. purchases 530 ounces of gold at $306 per ounce and settles the futures contract. December 20, 2020-Cullumber sells jewelry containing gold purchased in October 2020 for $337,000. The cost of the finished goods inventory is $204,400. (d) (e) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) No. Date Account Titles and Explanation Debit Credit (a) (b) (c) (d) (To record purchase.) (To record settlement of futures contract.) (To record sales.) (To record cost of goods sold.) (To record change in earnings.)

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