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Index Futures – Journal Questions

Journal Questions

1. Gregory Williams buys 500 shares of futures contract of ACC for Rs.950 per share on November 14. Brokerage is 0.3 percent for purchase as well as sales. He then sells the shares on November 21 for Rs.975 per share. The brokerage settlement is T = 2; the margin requirement is 20 percent.

2. Assume the shares were not sold and physical settlement was effected on November 28, which is the expiry date. On the expiry the price is quoted at Rs.945 per share. Pass necessary journal entries for purchase, sales, brokerage paid, and physical settlement. Calculate the profit/loss as of November 21 and November 28.

3. What if no physical settlement was effected on November 28? Also pass journal entries to that effect.

4. Prepare the Investments—ACC—Futures Account, treating the shares as physically settled.
Short Futures—Trade Currency AUD, Functional Currency USD
For the following scenario, prepare journal entries, general ledgers, trial balance, income statement, and balance sheet.
XYZ Fund had the following trades on an index in the futures market. The stock exchange requires that a margin of 20 percent of the value of the contract be maintained throughout the life of the contract.

Date               Product Expiry       Quantity         Rate (AUD)            B/S              Brokerage
22-Feb-X1       25-Apr-X1          –1,700              45                       S                   320
18-Mar-X1       25-Apr-X1          –1,400              50                       S                   350
13-Apr-X1       25-Apr-X1            2,000              43                       B                   400
25-Apr-X1       25-Apr-X1            1,100              42                       Expiry 

Date               FX Rate
22-Feb-X1     1.18182
28-Feb-X1     1.17762
15-Mar-X1     1.18322
31-Mar-X1     1.17521
10-Apr-X1     1.18231
25-Apr-X1     1.17425

Date               Market Price
22-Feb-X1        47
28-Feb-X1        55
31-Mar-X1        43
25-Apr-X1        45

Long Futures—Trade Currency SGD, Functional Currency USD

For the following scenario, prepare journal entries, general ledgers, trial balance, income statement, and balance sheet.
AA Fund had the following trades on an index in the futures market. The stock exchange requires that a margin of 10 percent of the value of the contract be maintained throughout the life of the contract.

Date              Product Expiry          Quantity          Rate (SGD)          B/S          Brokerage
25-Aug-X1     25-Nov-X1             10,000              52.5                  B               5,300
18-Oct-X1      25-Nov-X1             15,000              51.0                  B               5,200
10-Nov-X1     25-Nov-X1           –16,000              54.0                   S              3,000
25-Nov-X1     25-Nov-X1             –9,000              53.0                   Expiry 

Date                 FX Rate
25-Aug-X1      1.5389
31-Aug-X1      1.5432
30-Sep-X1       1.5535
18-Oct-X1       1.5375
31-Oct-X1       1.5296
10-Nov-X1      1.5431
25-Nov-X1      1.5159

Date                Market Price
31-Aug-X1           49
30-Sep-X1            47
31-Oct-X1            53
25-Nov-X1           57

Long Futures—Trade Currency JPY, Functional Currency USD

For the following scenario, prepare journal entries, general ledgers, trial balance, income statement, and balance sheet.
AA Fund had the following trades on an index in the futures market. The stock exchange requires that a margin of 30 percent of the value of the contract be maintained throughout the life of the contract.

Date               Product Expiry          Quantity            Rate (JPY)         B/S           Brokerage
29-Jan-X1        25-Apr-X1              1,000                800                   B                530
15-Mar-X1       25-Apr-X1              1,500                820                   B                520
10-Apr-X1       25-Apr-X1             –1,600                845                   S                300
25-Apr-X1       25-Apr-X1                –900                850                   Expiry 

Date               FX Rate
1-Jan-X1        123.805
29-Jan-X1      124.850
31-Jan-X1      125.705
28-Feb-X1     124.805
15-Mar-X1     125.705
31-Mar-X1     125.205
10-Apr-X1     124.235
25-Apr-X1     124.569

Date              Market Price
31-Jan-X1         750
28-Feb-X1        770
31-Mar-X1        855
25-Apr-X1        857

Short Futures—Functional Currency USD

For the following scenario, prepare journal entries, general ledgers, trial balance, income statement, and balance sheet.
ABC Fund had the following trades on an index in the futures market. The stock exchange requires that a margin of 15 percent of the value of the contract be maintained throughout the life of the contract.

Date               Product Expiry         Quantity         Rate (USD)       B/S           Brokerage
22-Feb-X1         25-Apr-X1           –1,500              45                  S                 320
18-Mar-X1         25-Apr-X1           –1,800              50                  S                 350
13-Apr-X1         25-Apr-X1             2,000              43                  B                 400
25-Apr-X1         25-Apr-X1             1,300              42                  Expiry 
 
Date                    Market Price
22-Feb-X1                47
28-Feb-X1                55
31-Mar-X1                43
25-Apr-X1                45

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