On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 250,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 250,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply: Date Spot Rate Forward Rate (to April 30, 2018) November 1, 2017 $ 0.36 $ 0.35 December 31, 2017 0.34 0.32 April 30, 2018 0.33 N/A Bernard's incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610. Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract. What is the impact on net income in 2017? What is the impact on net income in 2018

On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 190,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 190,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply:

Bernard's incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.

1. Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract

On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 170,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 170,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply:

Bernard's incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.

Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract.

What is the impact on net income in 2017?

What is the impact on net income in 2018?

Part A

Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. What is the impact on net income in 2017?
c. What is the impact on net income in 2018?
(In case of negative impact on net income, answer should be entered with a minus sign. Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Company X wishes to borrow U.S. dollars at a fixed rate of interest. Company Y wishes to borrow Japanese yen at a fixed rate of interest. The amounts required by the two companies are roughly the same at the current exchange rate. The companies have been quoted the following interest rates, which have been adjusted for the impact of taxes. Let's assume both companies X and Y entered into a SWAP contract with a bank B that requires 25 basis points per contract as fee. In total, how much interest rate would company X, Y pay and in what currency?

Company X wishes to borrow U.S. dollars at a fixed rate of interest. Company Y wishes to borrow Japanese yen at a fixed rate of interest. The amounts required by the two companies are roughly the same at the current exchange rate. The companies are subject to the following interest rates, which have been adjusted to reflect the impact of taxes: Yen Dollars Company X 5.0% 9.6% Company Y 6.5% 10.0% Design a swap that will net a bank, acting as intermediary, 50 basis points per annum. Make the swap equally attractive to the two companies and ensure that all foreign exchange risk is assumed by the bank.

why company x has comparative advantage in borrow in yen， and y advantage in borrow in dollar？

On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 120,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 120,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply:

Bernard's incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.

1. Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract.
2. What is the impact on net income in 2017?
3. What is the impact on net income in 2018?

On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 230,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 230,000 FCUs. The company properly designates the forward contract as a cash flow hedge of a foreign currency receivable. The following exchange rates apply:

Bernard's incremental borrowing rate is 12 percent. The present value factor for four months at an annual interest rate of 12 percent (1 percent per month) is 0.9610.

1.Prepare all journal entries, including December 31 adjusting entries, to record the sale and forward contract.

2.What is the impact on net income in 2017?

3.What is the impact on net income in 2018?

15.1 Case in Point: Newell Rubbermaid Leverages Cost Controls to Grow

Newell Company grew to be a diversified manufacturer and marketer of simple household items, cookware, and hardware. In the early 1950s, Newell Company’s business consisted solely of manufactured curtain rods that were sold through hardware stores and retailers like Sears. Since the 1960s, however, the company has diversified extensively through acquisitions of businesses for paintbrushes, writing pens, pots and pans, hairbrushes, and the like. Over 90% of its growth can be attributed to these many small acquisitions, whose performance Newell improved tremendously through aggressive restructuring and its corporate emphasis on cost cutting and cost controls. Usually within a year of the acquisition, Newell would bring in new leadership and install its own financial controller in the acquired unit. Then, three standard sets of controls were introduced: an integrated financial accounting system, a sales and order processing and tracking system, and a flexible manufacturing system. Once these systems were in place, managers were able to control costs by limiting expenses to those previously budgeted. Administration, accounting, and customer-related financial accounting aspects of the acquired business were also consolidated into Newell’s corporate headquarters to further reduce and control costs.

While Newell Company’s 16 different lines of business may appear quite different, they all share the common characteristics of being staple manufactured items sold primarily through volume retail channels like Wal-Mart, Target, and Kmart. Because Newell operates each line of business autonomously (separate manufacturing, research and development [R&D], and selling responsibilities for each), it is perhaps best described as pursuing a related, linked diversification strategy. The common linkages are both internal (accounting systems, product merchandising skills, and acquisition competency) and external (distribution channel of volume retailers). Beyond its internal systems and processes, Newell was also able to control costs through outcome controls. That is, business managers were paid a bonus based on the profitability of their particular unit—in fact, the firm’s strategy is to achieve profits, not simply growth at the expense of profits. Newell managers could expect a base salary equal to the industry average but could earn bonuses ranging from 35% to 100% based on their rank and unit profitability.

In 1999, Newell acquired Rubbermaid, a U.S.-based manufacturer of flexible plastic products like trash cans, reheatable and freezable food containers, and a broad range of other plastic storage containers designed for home and office use. While Rubbermaid was highly innovative (over 80% of its growth has come from internal new product development), it had difficulty controlling costs and was losing ground against powerful customers like Wal-Mart. Newell believed that the market power it wielded with retailers like Wal-Mart would help it turn Rubbermaid’s prospects around. The acquisition deal between these two companies resulted in a single company that was twice as big and became known as Newell Rubbermaid Inc. (NYSE: NWL). In 2010, Fortune named Newell Rubbermaid the number 7 “Most Admired Company” in the home equipment and furnishings category.

1. How do the controls Newell uses fit its strategy?

Ethics and EPS – Change of Estimates

Acme Company has as a goal that its earnings per share should increase by at least 3% each year; this goal has been attained every year over the past decade. As a result, the market price per share of Acme's common stock also has increased each year. Last year (2019), Acme's earnings per share was $3. This year, however, is a different story. Because of decreasing sales, preliminary computations at the end of 2020 show that earnings per share will be only $2.99 per share.

You are the accountant for Acme. Acme's controller, Steve Bryan, has come to you with some suggestions. He says, “I've noticed that the decrease in revenues has been primarily related to credit sales. Since we have fewer credit sales, I believe we are justified in reducing our bad debts expense from 4% to 2% of net sales. I also think that because of the decreased sales, we won't use our factory equipment as much, so we can extend its estimated remaining life from 10 to 15 years for computing our straight-line depreciation expense. Based on my calculations, if we make these changes, Acme's 2030 earnings per share will be $3.06. This will sure make our shareholders happy, not to mention our CEO. You may even get a promotion. What do you think?”