Accounting Case Problem
Following the steps outlined below:
It needs to be written out with steps 1-5 for accounting research
1. Identify the issue/s
2. Collect the Evidence
3. Analyze and evaluate alternatives
4. Develop Conclusion
5. Communicate results and document
Case Problem #1:The Rich Company seeks to limit its potential exposure from future variable-interest debt by engaging in a cash flow hedge. Thus, it seeks to acquire a financial instrument that varies in price "in opposition" to Rick's expected payments on this debt instrument. However, it is unsure of the effectiveness of this hedging instrument-since it is unsure of the expected "timing" of such transactions. Can Rich classify this proposed financial instrument as a cash flow (or other) hedge?
Case Problem #2: Merrill Corporation engages in a valid cash flow hedge where it minimizes the risk from variable interest rated debt by promising to issue dividend payments from both its own portfolio and its portfolio of "outside" marketable securities. Since interest payments normally are classified on the Statement of Cash Flows as Operating Activities; payments of dividends from "outside" investments are classified as Investing Activities; and dividend payments from its own stock are financing activities, where should Merrill disclose the cash flows from the above transactions?