Exhibit 4
MarginWHEW Bank Case Journal Entries and Summary
of Results
(Students are required to fill in the
numbers shown in red.)
Instructions: Please fill in debits without dollar signs and credits in parentheses. If there is no entry for a given account, please leave it blank rather than entering a zero. Note that all accounts listed for a given date will not necessarily have entries on that date.
Discounting |
at 0.0% APR | Discounting | at 6.0% APR | ||
|
|
Debit |
|
Debit |
|
Date |
MarginWHEW
Bank Accounts |
(Credit) |
Balance |
(Credit) |
Balance |
1999 |
Assumed
FAS 133 discount rate = |
0.000000% |
0.000000% |
0.016438% |
0.016438% |
17-Dec |
Cash |
10,000,000
|
10,000,000
|
10,000,000
|
10,000,000
|
|
Notes
payable |
(10,000,000) |
(10,000,000) |
(10,000,000) |
(10,000,000) |
|
-To
record borrowing for one year |
|
|
|
|
|
|
|
|
|
|
17-Dec |
Cash |
(10,000,000) |
0
|
(10,000,000) |
0
|
|
Notes
receivable |
10,000,000
|
0
|
10,000,000
|
0
|
|
-To
record lending for one year |
|
|
|
|
|
|
|
|
|
|
17-Dec |
Cash |
(500) |
(500) |
(500) |
(500) |
|
Futures
margin account |
500
|
500
|
500
|
500
|
|
-To
record margin account |
|
|
|
|
|
|
|
12/31/99 |
|
12/31/1999 |
31-Dec |
Cash |
0
|
(500) |
0
|
(500) |
|
Futures
margin account |
2,250
|
2,750
|
2,186
|
2,686
|
|
Other
comprehensive income (OCI) |
(3,000) |
(3,000) |
(2,918) |
(2,918) |
|
Interest
expense (revenue) |
750
|
750
|
732
|
732
|
|
- To
adjust futures contracts to fair value.
|
|
|
|
|
|
|
|
01/31/00 |
|
01/31/2000 |
31-Jan |
Cash |
0
|
(500) |
0
|
(500) |
|
Futures
margin account |
8,000
|
10,750
|
7,894
|
10,580
|
|
Other
comprehensive income (OCI) |
(7,500) |
(10,500) |
(7,348) |
(10,266) |
|
Interest
expense (revenue) |
(500) |
250
|
(546) |
186
|
|
- To
adjust futures contracts to fair value.
|
|
|
|
|
|
|
|
02/29/00 |
|
02/29/2000 |
29-Feb |
Cash |
0
|
(500) |
0
|
(500) |
|
Futures
margin account |
31,000
|
41,750
|
30,489
|
41,069
|
|
Other
comprehensive income (OCI) |
(42,000) |
(52,500) |
(41,305) |
(51,571) |
|
Interest
expense (revenue) |
11,000
|
11,250
|
10,816
|
11,002
|
|
- To
adjust futures contracts to fair value.
|
|
|
|
|
|
|
|
03/17/00 |
|
03/17/2000 |
17-Mar |
Cash |
28,500
|
28,000
|
28,500
|
28,000
|
|
Futures
margin account |
8,250
|
50,000
|
7,837
|
48,906
|
|
Other
comprehensive income (OCI) |
(11,000) |
(63,500) |
(10,506) |
(62,077) |
|
Interest
expense (revenue) |
(25,750) |
(14,500) |
(25,831) |
(14,829) |
|
- To
adjust futures contracts to fair value.
|
|
|
|
|
|
|
|
|
|
|
17-Mar |
Cash |
200,000
|
228,000
|
200,000
|
228,000
|
|
Interest
expense (revenue) |
(200,000) |
(214,500) |
(200,000) |
(214,500) |
|
-To
record interest on note receivable |
|
|
|
|
|
|
|
|
|
|
17-Mar |
Cash |
(145,347) |
82,653
|
(145,347) |
82,653
|
|
Interest
expense (revenue) |
145,347
|
(69,153) |
145,347
|
(69,153) |
|
-To
record interest on note payable |
|
|
|
|
|
|
|
03/31/2000 |
|
03/31/2000 |
31-Mar |
Cash |
0
|
82,653
|
0
|
82,653
|
|
Futures
margin account |
1,000
|
51,000
|
1,092
|
49,998
|
|
Other
comprehensive income (OCI) |
(2,000) |
(65,500) |
(2,104) |
(64,181) |
|
Interest
expense (revenue) |
(53,653) |
(68,153) |
(53,641) |
(68,470) |
|
- To
adjust futures contracts to fair value.
|
|
|
|
|
|
|
|
04/30/2000 |
|
04/30/2000 |
30-Apr |
Cash |
0
|
82,653
|
0
|
82,653
|
|
Futures
margin account |
1,250
|
52,250
|
1,473
|
51,471
|
|
Other
comprehensive income (OCI) |
(1,500) |
(67,000) |
(1,794) |
(65,975) |
|
Interest
expense (revenue) |
250
|
(67,903) |
321
|
(68,149) |
|
- To
adjust futures contracts to fair value.
|
|
|
|
|
|
|
|
05/31/2000 |
|
05/31/2000 |
31-May |
Cash |
0
|
82,653
|
0
|
82,653
|
|
Futures
margin account |
1,250
|
53,500
|
1,496
|
52,967
|
|
Other
comprehensive income (OCI) |
(1,500) |
(68,500) |
(1,821) |
(67,796) |
|
Interest
expense (revenue) |
250
|
(67,653) |
325
|
(67,824) |
|
- To
adjust futures contracts to fair value.
|
|
|
|
|
|
|
|
06/17/2000 |
` |
06/17/2000 |
17-Jun |
Cash |
28,750
|
111,403
|
28,750
|
111,403
|
|
Futures
margin account |
(26,750) |
26,750
|
(26,611) |
26,356
|
|
Other
comprehensive income (OCI) |
32,250
|
(36,250) |
32,090
|
(35,706) |
|
Interest
expense (revenue) |
(34,250) |
(101,903) |
(34,229) |
(102,053) |
|
- To
adjust futures contracts to fair value.
|
|
|
|
|
|
|
|
|
|
|
17-Jun |
Cash |
200,000
|
311,403
|
200,000
|
311,403
|
|
Interest
expense (revenue) |
(200,000) |
(301,903) |
(200,000) |
(301,903) |
|
-To
record interest on note receivable |
|
|
|
|
|
|
|
|
|
|
17-Jun |
Cash |
(177,450) |
133,953
|
(177,450) |
133,953
|
|
Interest
expense (revenue) |
177,450
|
(124,453) |
177,450
|
(124,453) |
|
-To
record interest on note payable |
|
|
|
|
|
|
|
06/30/2000 |
` |
06/30/2000 |
30-Jun |
Cash |
0
|
133,953
|
0
|
133,953
|
|
Futures
margin account |
750
|
27,500
|
796
|
27,152
|
|
Other
comprehensive income (OCI) |
(500) |
(36,750) |
(570) |
(36,276) |
|
Interest
expense (revenue) |
(250) |
(124,703) |
(376) |
(124,829) |
|
- To
adjust futures contracts to fair value.
|
|
|
|
|
|
|
|
07/31/2000 |
` |
07/31/2000 |
31-Jul |
Cash |
0
|
133,953
|
0
|
133,953
|
|
Futures
margin account |
500
|
28,000
|
632
|
27,784
|
|
Other
comprehensive income (OCI) |
(750) |
(37,500) |
(929) |
(37,205) |
|
Interest
expense (revenue) |
250
|
(124,453) |
297
|
(124,532) |
|
- To
adjust futures contracts to fair value.
|
|
|
|
|
|
|
|
08/31/2000 |
` |
08/31/2000 |
31-Aug |
Cash |
0
|
133,953
|
0
|
133,953
|
|
Futures
margin account |
750
|
28,750
|
887
|
28,671
|
|
Other
comprehensive income (OCI) |
(500) |
(38,000) |
(689) |
(37,894) |
|
Interest
expense (revenue) |
(250) |
(124,703) |
(198) |
(124,730) |
|
- To
adjust futures contracts to fair value.
|
|
|
|
|
|
|
|
09/17/2000 |
` |
09/17/2000 |
17-Sep |
Cash |
29,000
|
162,953
|
29,000
|
162,953
|
|
Futures
margin account |
(28,750) |
0
|
(28,750) |
0
|
|
Other
comprehensive income (OCI) |
38,000
|
0
|
38,000
|
0
|
|
Interest
expense (revenue) |
(38,250) |
(162,953) |
(38,250) |
(162,953) |
|
-To
adjust futures contracts to fair value |
|
|
|
|
|
|
|
09/17/2000 |
` |
09/17/2000 |
17-Sep |
Cash |
200,000
|
362,953
|
200,000
|
362,953
|
|
Interest
expense (revenue) |
(200,000) |
(362,953) |
(200,000) |
(362,953) |
|
-To
record interest on note receivable |
|
|
|
|
|
|
|
09/17/2000 |
` |
09/17/2000 |
17-Sep |
Cash |
(182,000) |
180,953
|
(182,000) |
180,953
|
|
Interest
expense (revenue) |
182,000
|
(180,953) |
182,000
|
(180,953) |
|
-To
record interest on note payable |
|
|
|
|
|
|
|
09/30/2000 |
` |
09/30/2000 |
30-Sep |
Cash |
0
|
180,953
|
0
|
180,953
|
|
Futures
margin account |
0
|
0
|
0
|
0
|
|
Other
comprehensive income (OCI) |
0
|
0
|
0
|
0
|
|
Interest
expense (revenue) |
0
|
(180,953) |
0
|
(180,953) |
|
-To
adjust futures contracts to fair value |
|
|
|
|
|
|
|
10/31/2000 |
` |
10/31/2000 |
31-Oct |
Cash |
0
|
180,953
|
0
|
180,953
|
|
Futures
margin account |
0
|
0
|
0
|
0
|
|
Other
comprehensive income (OCI) |
0
|
0
|
0
|
0
|
|
Interest
expense (revenue) |
0
|
(180,953) |
0
|
(180,953) |
|
-To
adjust futures contracts to fair value |
|
|
|
|
|
|
|
11/30/2000 |
` |
11/30/2000 |
30-Nov |
Cash |
0
|
180,953
|
0
|
180,953
|
|
Futures
margin account |
0
|
0
|
0
|
0
|
|
Other
comprehensive income (OCI) |
0
|
0
|
0
|
0
|
|
Interest
expense (revenue) |
0
|
(180,953) |
0
|
(180,953) |
|
-To
adjust futures contracts to fair value. |
|
|
|
|
|
|
|
12/17/2000 |
` |
12/17/2000 |
17-Dec |
Cash |
0
|
180,953
|
0
|
180,953
|
|
Futures
margin account |
0
|
0
|
0
|
0
|
|
Other
comprehensive income (OCI) |
0
|
0
|
0
|
0
|
|
Interest
expense (revenue) |
0
|
(180,953) |
0
|
(180,953) |
|
-To
adjust futures contracts to fair value. |
|
|
|
|
|
|
|
12/17/2000 |
` |
12/17/2000 |
17-Dec |
Cash |
200,000
|
380,953
|
200,000
|
380,953
|
|
Interest
expense (revenue) |
(200,000) |
(380,953) |
(200,000) |
(380,953) |
|
-To
record interest on note receivable |
|
|
0
|
0
|
|
|
|
12/17/2000 |
` |
12/17/2000 |
17-Dec |
Cash |
(184,781) |
196,172
|
(184,781) |
196,172
|
|
Interest
expense (revenue) |
184,781
|
(196,172) |
184,781
|
(196,172) |
|
-To
record interest on note payable |
|
|
|
|
|
|
|
12/17/2000 |
` |
12/17/2000 |
17-Dec |
Cash |
10,000,000
|
10,196,172
|
10,000,000
|
10,196,172
|
|
Notes
receivable |
(10,000,000) |
0
|
(10,000,000) |
0
|
|
-To
record the payoff of the note receivable |
|
|
|
|
|
|
|
12/17/2000 |
` |
12/17/2000 |
17-Dec |
Cash |
(10,000,000) |
196,172
|
(10,000,000) |
196,172
|
|
Notes
payable |
10,000,000
|
0
|
10,000,000
|
0
|
|
-To
record the payoff of the note payable |
|
|
|
|
|
|
|
|
|
|
31-Dec |
Interest
expense (revenue) |
196,172
|
0
|
196,172
|
0
|
|
Retained
earnings |
(196,172) |
(196,172) |
(196,172) |
(196,172) |
|
-To
close the books |
|
|
|
|
|
|
|
|
|
|
SUMMARY of MarginWHEW Bank |
||||
Dollars | Dollars | Percent | ||
Interest revenue for the year | $800,000 |
8.0000% |
||
Less interest expense if not hedged: | 3/17/00 |
($145,347) |
||
6/17/00 |
(177,450) | |||
9/17/00 |
(182,000) | |||
12/17/00 |
(184,781) |
(689,578) | -6.8958% |
|
Net income if interest expense is not hedged | $110,422 |
1.1042% |
||
Add futures hedging gains and losses | 3/17/00 |
$28,500 |
||
6/17/00 |
28,750 | |||
9/17/00 |
28,500 | |||
12/17/00 |
0 | 85,750 | 0.8575% |
|
Net income if interest expense is hedged | $196,172 |
1.9617% |
Comment: Unlike option contract hedges that only lock in a net income floor or cap, the futures contract hedges in this case lock in a fixed net income of amount of $196,172.