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    This document contains solutions to past exam questions about accounting for derivatives. For futures contracts, no entry is required when the contract is initiated. Gains and losses are recorded as the contract is marked to market. For options, the premium paid is recorded as an asset initially, then gains or losses from changes in fair value are recorded in other comprehensive income until exercise or expiry. Upon exercise, the cost of the underlying item is recorded along with closing out the option asset or liability.

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    ACCT3103

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    This document contains solutions to past exam questions about accounting for derivatives. For futures contracts, no entry is required when the contract is initiated. Gains and losses are recorded as the contract is marked to market. For options, the premium paid is recorded as an asset initially, then gains or losses from changes in fair value are recorded in other comprehensive income until exercise or expiry. Upon exercise, the cost of the underlying item is recorded along with closing out the option asset or liability.

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    2 views1 page

    Derivatives Solutions

    Uploaded by

    Sleepy marshmallow
    This document contains solutions to past exam questions about accounting for derivatives. For futures contracts, no entry is required when the contract is initiated. Gains and losses are recorded as the contract is marked to market. For options, the premium paid is recorded as an asset initially, then gains or losses from changes in fair value are recorded in other comprehensive income until exercise or expiry. Upon exercise, the cost of the underlying item is recorded along with closing out the option asset or liability.

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    ACCT3103 Intermediate Financial Accounting II Past Exam Question Solutions

    Topic 6: Accounting for Derivatives

    Question 1: Futures

    a. No entry is required

    b. Dr. Loss on futures 60,000


    Cr. Futures 60,000

    Dr. Firm commitment 60,000


    Cr. Gain on firm commitment 60,000

    c. Dr. PPE 1,400,000


    Cr. Cash 1,340,000
    Firm commitment 60,000

    Dr. Futures 60,000


    Cr. Cash 60,000

    Question 2: Options

    a. November 1, 2020
    Dr. Call option 1,000
    Cr. Cash 1,000

    b. December 31, 2020


    Dr. Call option [($120-$100) x 1,000] – $1,000 19,000
    Cr. Other comprehensive income 19,000

    c. January 1, 2021
    Dr. Fuel expense ($120 x 1,000) 120,000
    Cr. Cash 120,000
    Dr. Cash 20,000
    Cr. Call option 20,000
    Dr. Other comprehensive income 19,000
    Cr. Gain on call option 19,000

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