Assume XYZ sold the widgets in 1) to ABC for cash but signed an unconditional agreement to repurchase the widgets from ABC on March 31, 2018 for $50.69 a piece. XYZ has imputed a 5% interest rate for the repurchase contract.

a) Explain what a repurchase agreement is and how the forward and call versions differ from each other.

b) Prepare any journal entries that would be needed on 1/1/2018 when the transaction was executed.

c) ABC didnt return any widgets and XYZ didnt do financial statements until 3/30/18. They completed the repurchase contract on that date and bought back all the widgets at $50.69. Record any journal entries needed on 3/31/2018 to close out the contract. You can ignore entries to put widgets back in XYZs inventory.

d) How would the recording of this transaction differ if XYZ hadnt guaranteed to repurchase the widgets but had given ABC the option to resell them to XYZ, but at a reduced price of $45 a piece?