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On November 1,2017, you purchase inventory costing 100,000FC and due in 90 days. Worried about your exposure to vagaries in currencies, you immediately enter into a forward contract to deliver the 100,000FC and collect U.S. cash. The spot rate and Forward rates are below 1. Date November 1, 2017 December 31, 2017 January 31, 2017 Spot Rate $2.50 $2.70 $2.55 Forward rate to Jan 31, 2018 $2.40 $2.65 N/A Your incremental interest rate is 12% or .9610 per month. Prepare all relevant journal entries assuming: The transaction qualifies as a Cash Flow Hedge. b. a. The transaction is a Fair Value Hedge. Ms. Good, Ms. Bad, and Mr. Ugly decide to form a partnership to sell Hi-end women's leather goods. The name their enterprise The Good, The Bad and The Ugly. Mr. Ugly takes responsibility for management of the store. He will handle all managerial decisions like advertising, store hours, staffing, and displays. Ms. Bad is a wonder at sales. She will connect with customers and handle internet operations. Finally, Ms. Good will mostly contribute cash to start the business. She will not be part of operations. 2. The three partners decide on the following formula to allocate income I. Each partner will receive 10% return on their beginning capital account. 2. Bad and Ugly will receive salary allowances of $20,000 each 3. Any remaining income or loss will be allocated: a. Good b. Bad c. Ugly 40% 20% 40% Finally, Mr. Ugly has been manufacturing leather goods for some time. He has an operation has a book value of $20,000 but has a fair value of $100,000. Ms. Good contributes S150,000 start the business. In the first two years of operation, the partnership earns $60,000 and $200,00. Each partner withdraws $1,000 a month for the two years. th Prepare a schedule allocating partnership income for the two years. Prepare the a schedule showing the partnership capital accounts for the two years a. b. On November 1,2017, you purchase inventory costing 100,000FC and due in 90 days. Worried about your exposure to vagaries in currencies, you immediately enter into a forward contract to deliver the 100,000FC and collect U.S. cash. The spot rate and Forward rates are below 1. Date November 1, 2017 December 31, 2017 January 31, 2017 Spot Rate $2.50 $2.70 $2.55 Forward rate to Jan 31, 2018 $2.40 $2.65 N/A Your incremental interest rate is 12% or .9610 per month. Prepare all relevant journal entries assuming: The transaction qualifies as a Cash Flow Hedge. b. a. The transaction is a Fair Value Hedge. Ms. Good, Ms. Bad, and Mr. Ugly decide to form a partnership to sell Hi-end women's leather goods. The name their enterprise The Good, The Bad and The Ugly. Mr. Ugly takes responsibility for management of the store. He will handle all managerial decisions like advertising, store hours, staffing, and displays. Ms. Bad is a wonder at sales. She will connect with customers and handle internet operations. Finally, Ms. Good will mostly contribute cash to start the business. She will not be part of operations. 2. The three partners decide on the following formula to allocate income I. Each partner will receive 10% return on their beginning capital account. 2. Bad and Ugly will receive salary allowances of $20,000 each 3. Any remaining income or loss will be allocated: a. Good b. Bad c. Ugly 40% 20% 40% Finally, Mr. Ugly has been manufacturing leather goods for some time. He has an operation has a book value of $20,000 but has a fair value of $100,000. Ms. Good contributes S150,000 start the business. In the first two years of operation, the partnership earns $60,000 and $200,00. Each partner withdraws $1,000 a month for the two years. th Prepare a schedule allocating partnership income for the two years. Prepare the a schedule showing the partnership capital accounts for the two years a. b

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