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In: AccountingNGW, a consumer gas provider, estimates a rather cold winter. Asa result it decides to...NGW, a consumer gas provider, estimates a rather cold winter. Asa result it decides to enter into a futures contract on the NYMEXfor natural gas on November 2, 2016. The trading unit is 10,000millioin British thermal units (MMBtu). The three month futurescontract rate is $7.00 per MMBtu, so each contract will cost NGW$70,000. In addition, the exchange requires a $5,000 deposit oneach contract. NGW enters into 20 such contracts.Why is the futures contract likely to be considered aneffective hedge and therefore qualified for hedge accounting?Why would this transaction be accounted for as a cash flowhedge?Assume the Dec 31, 2016, futures contract is $6.75 for deliveryon Feb 2, 2017, and the spot rate on Feb 2, 2017, is $6.85. Assumethat NGW sells all of the gas on Feb 3, 2017, for $8.00 per MMBtu.Prepare all the necessary journal entries from Nov 2, 2016, throughFeb 3, 2017, to account for this hedge situation.