Global Products Inc Financial Statements For 2016
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Global Products Inc Financial Statements For 2016
Question Description
Global Products Inc. (GPI) uses pork bellies in the processing of its bacon products. GPI anticipates that it will need to purchase 200 tons of pork bellies in September 2016 for its
regular orders. However, if the price of this commodity increases, GPI’s cost to produce the bacon products will increase, which could cut into its profit margins.
To hedge the risk of increased pork belly prices, on July 1, 2016, GPI enters into a forward contract and designates this contract as a cash flow hedge of the anticipated purchase. The notional amount of the contract is 200 tons, and the terms of the contract require GPI to purchase each ton at a price of $2,400 per ton on September 30, 2016 (or settle the contract net on the basis of the difference between the $2,400 and the price of pork bellies at September 30).
Assume the following data with respect to the price of pork bellies.
Date Price per ton
July 1, 2016 $2,400
July 31, 2016 $2,100
August 31, 2016 $2,900
September 30, 2016 $2,950
REQUIRED:
Prepare any necessary journal entries related to the hedging activity on the following dates:
July 1, 2016: Inception of the forward contract.
July 31, 2016: GPI prepares financial statements.
August 31, 2016: GPI prepares financial statements.
September 30, 2016: GPI settles the forward contract and purchases 200 tons of pork bellies on the open market for $2,950
October 15, 2016: GPI sells its bacon products made from the pork bellies purchased on September 30, 2016 for $1,200,000. The cost to convert the raw material goods into finished goods is $150,000.
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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Global Products Inc Financial Statements For 2016