JY investment Ltd holds a well-diversified portfolio of shares that has a market value of $1.5 million...

Free

60.1K

Verified Solution

Question

Accounting

JY investment Ltd holds awell-diversified portfolio of shares that has a market value of
$1.5 million on 30June 2019. JY is concerned about possible downturns in the sharemarket and on 1 March 2020 decides to take out a sell position ineleven “September 2020 SPI 200 Futures” units when the SPI 200 is5500. The SPI 200 Futures contract unit value is the value of SPI200 multiplied by $25. To enter the contract, JY pays an initialcash deposit (margin) of $150,000 to a broker.
On 30 June 2020, thereporting date of JY investment Ltd, the unit price of theSeptember SPI futures contracts has fallen to 5300 and the marketvalue of the firm’s portfolio of shares is $1 435 000. Assumebroker allows a $50,000 drop before making a margin call to allowfor minor fluctuations in the market.
The shares are soldon 31 August 2020 when the market value of the shares is $1 290 000and the September SPI 200 futures contract closed out at 5250 on 31August 2020. Assume the futures contracts qualify as a hedge, theshares are marked to market.
QUESTION
Prepare journalentries to account for the above events from 1 March 2020 to 31August 2020. Show all calculations and round them to the nearestdollar amount. No narration is required.

Answer & Explanation Solved by verified expert

3.7 Ratings (634 Votes)

sol:

Journal Entries for above transactions are as follows -

1/03/20 Share capital a/c Dr. 150000

To bank a/c 150000

(Being initial cash deposit paid for entering share selling contract)

31/8/20 Bank a/c Dr. 1290000

To share capital a/c 1290000

( Being shares sold at market price)

As
on
30
jun
2020, market value of firm's portfolio of shares is
$1435000.

market value of share holding is $1500000

Unit price has fallen to 5300

Lower of both can be considered,

As per accounting principles

Please up vote....Its very usefull for us .....Thank you .....So Much......If any qurries comment below....I will resolve ASAP....Until u got.....

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

JY investment Ltd holds a well-diversified portfolio of shares that has a market value of $1.5 million...

Free

60.1K

Verified Solution

Question

Accounting

Answer & Explanation Solved by verified expert

Get Answers to Unlimited Questions

Membership Benefits:

Other questions asked by students

Problem #8 Among 300 employees in a company 100 had Engineering degree, 110 had MBA degree, and...

There are 12 seats in a row. How many ways can we seat 4 students if...

Explain glomerular filtration and the mechanisms that control its pressure and rate. Why is GFR critical...

Given the horizontal circle readings below answer the following questions 1 FL 99 25 30...

Calculate the distance between (-1/2,2) and (5/3,-2/3).

Which of the following is not a "product cost" under absorption costing? A. Direct materials...

1.Compute and interpret financial ratios that managers use to assess liquidity. 2.Compute and interpret financial...

Which of the following is true regarding the Balance Sheet of a federal agency? Multiple...

Yellow Company's variable expenses are 40% of sales and have monthly fixed expenses of $12,000....

SUSTAINABILITY For this week's discussion, we will look at sustainability and the Balanced Scorecard (BSC)....

Hey Chegg, I could really use your help with this problem. I tried solving it...

nan organized system of financial records, credit card records belong in a safe deposit box.