Enron enters into contracts. The first is a contract to deliver $1000000 Mbtu of gas a month for 5 years to a buyer for USD 3.60/Mbtu. Enron simultaneously covers that sale with offsetting the gas needed to fulfill the contract, looking in a cost of USD 3.45/Mbtu. Calculate profits over 5 years under traditional accrual accounting and revenue recognition and MTM. Your answer should clearly demonstrate changes in patterns of earnings recognition over a 5 year horizon. Assumptions: Profit on contact per month:$150000. Discount rate per ann:10%
