2 Questions: Case Studies

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Question 1: Case Study: A Small Matter of Trimming

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Please read the case study and answer the questions that follow. Case Study: A Small Matter of Trimming—https://uwaterloo.ca/centre-for-accounting-ethics/resources/ethics-teaching-cases/small-matter-trimming.

Cheating occurs in different forms. In the case study, Tracy and Denise need to provide a recommendation on a stocking fee for large and small Breweries.

  1. What was Denise’s and Tracey’s ethical justification to go along with the stocking fee?
  2. What could have “fixed the data” done to foster and create an ethical environment?
  3. What might be the cheating signal in the company that would make deontology or utilitarianism ethical theories affective?
  4. What might be the duty to the client that Denise and Tracy have?


  • Your written paper should be 3-4 pages in length not counting the title and reference pages, which you must include.
  • Use terms, evidence, and concepts from class readings.
  • You need to cite at least three sources for this assignment, outside of the textbook.

Review the Module 4 Critical Thinking rubric for full details on how you will be graded on this assignment.


Question 2: Here are the options: Please chose which ever one you find easiest to complete.

Option #1: Scandinavia Corporation

Scandinavia Corporation sold machinery to a Swedish Company for 200,000 kroner (SKr) on April 20, Year 1 with settlement to be in 60 days. On that same date, Scandinavia entered into a 60-day forward contract to sell 200,000 SKr at a forward rate of 1 SKr = $0.167 to manage its exposed foreign currency receivable. The forward contract is NOT designated as a hedge. The spot rates were as follows: April 20, Year 1: 1 SKr = $0.170; June 19, Year 1: 1 SKr = $0.165.


  1. Record all necessary journal entries required related to the foreign transaction and the forward contact on the books of Scandinavia Corporation during the 60-day period, including an explanation for each journal entry and the basis of each calculation required for each journal entry, under the US GAAP.
  2. Compare the effects on net income of Scandinavia’s use of the forward exchange contract vs. the effect if Scandinavia had not used a forward exchange contract under the US GAAP. Did Scandinavia save money by using the forward exchange contract or lose money as a result of using the forward exchange contract? How much money did Scandinavia save or lose? Make sure you show the basis of your calculations (using the forward contract vs. not using the forward contract) in your submission.
  • Your Excel file document submission should be formatted according APA
  • Be sure to discuss and reference concepts taken from the assigned readings and relevant research.
  • You must include a minimum of three credible, academic, or professional references supporting your answers to the requirements.

Option #2: Jones Corporation

Jones Corporation is a small Western Company that manufactures large pieces of furniture. Tommy Jones, Jones’ President, has decided to expand the company’s operations significantly and entered into a contract with a German Company to buy specialty manufacturing equipment required to expand the manufacturing capacity. The contract with the German Company fixes the price of the equipment at 5 million euros, and the equipment will be delivered in five months with payment due 30 days after delivery.

Tommy is concerned that the value of the euro versus the U.S. dollar could increase during the six months between the date of the contract and the date of the purchase of the payment, which would increase the effective purchase price of the equipment.

Pamela Jones, Jones’ Treasurer, has suggested that Jones Corporation should enter into a forward exchange contract to purchase 5 million euros in six months, thereby locking in the exchange rate for euros. Tommy likes the idea of eliminating the uncertainty over the euro exchange rate but is concerned about the effects of the forward contract on Jones’ financial statements. Because Jones Corporation has not had previous experience with foreign currency transactions, Pamela also is unsure of what the financial statement effects would be.


  1. Research the most recent accounting standards on accounting for foreign exchange contracts under the US GAAP using the FASB Codification. Pamela has asked you, as her assistant, to research the accounting for this forward exchange contract.
  2. Write a memo to Pamela, reporting on the results of your research. Your memo should include example journal entries that would be required to be made on Jones’ books on each respective date up to the date that the forward contract is fulfilled six months later, assuming that the euro to Dollar exchange rate on the date of contract is 1.25 euros = $1 U.S. dollar; the euro to dollar exchange rate on the date the equipment is delivered by the German Company to Jones is 1.27 euros = $1 U.S. dollar; and the forward contract exchange rate is $1.26 = $1 U.S. dollar. Assume the delivery terms for the equipment from the German Company to Jones Corporation is FOB-Shipping Point.
  3. Your memo should then, in a second step/analysis, include examples of journal entries that would be required on Jones’ books on each respective date if the forward contract was not executed or if the forward contract were entered.
  • Your Word document file submission should be a minimum of 3 pages in length (not including the required cover and reference pages).
  • Format your submission according to the APA
  • Be sure to discuss and reference concepts taken from the assigned readings and from your relevant research. You must include a minimum of three credible, academic, or professional references.

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