XYZ Affair

(noun)

The XYZ Affair was a 1798 diplomatic episode during the administration of John Adams that Americans interpreted as an insult from France. It led to an undeclared naval war called the Quasi-War, which raged at sea from 1798 to 1800.

Related Terms

  • Proclamation of Neutrality
  • Matthew Lyon
  • Alien and Sedition Acts
  • Quasi-War

(noun)

A political and diplomatic episode in 1797 and 1798 involving a confrontation between the United States and Republican France that led to the Quasi-War. 

Related Terms

  • Proclamation of Neutrality
  • Matthew Lyon
  • Alien and Sedition Acts
  • Quasi-War

(noun)

A 1798 diplomatic episode during the administration of John Adams that Americans interpreted as an insult from France.

Related Terms

  • Proclamation of Neutrality
  • Matthew Lyon
  • Alien and Sedition Acts
  • Quasi-War

Examples of XYZ Affair in the following topics:

  • The XYZ Affair

    • The XYZ Affair refers to the bribes demanded by French agents in the negotiating dispatches to cease French seizures of American vessels.
    • Since Adams omitted the names of these French agents in the dispatches, referring to them as "X, Y, and Z", this became known as the XYZ Affair.
  • The "Reign of Witches"

    • Despite the XYZ Affair and the Quasi War, which had incited francophobic sentiment in the majority of the American public, Democrat-Republicans remained pro-French and outspoken critics of the Federalist administration.
    • The Federalists, on the other hand, were suspicious of the Democrat-Republican party's affinity for France, especially since in the released dispatches of the XYZ affair, agent "Y" had boasted of the existence of a "French" party in American politics.
  • The Quasi-War

    • Because Adams omitted the names of the French agents in the dispatches, referring to them as "X, Y, and Z," the incident became known as the "XYZ Affair."
  • The Alien and Sedition Acts

    • The XYZ Affair and the Quasi-War incited Francophobic sentiment in the majority of the American public; however, Democratic-Republicans remained supportive on the French and outspoken critics of the Federalist administration, which they believed was unconstitutionally developing a tyrannical centralized government.
    • This suspicion was heightened when the dispatches of the XYZ Affair were released, and agent "Y" boasted of the existence of a "French" party in American politics.
  • Reporting Equity Investments

    • The following journal entries are made by ABC to record the investment in XYZ:
    • DR - Investment in XYZ Corporation USD 80,000 (80,000 shares * USD 1 market price/share)
    • Journal entry to account for the pro-rata share of XYZ annual income:
    • DR - Investment in XYZ Corporation USD 30,000 (100,000 net income * .30)
    • Journal entry to account for the pro-rata share of XYZ dividends:
  • Reporting Fair Value

    • ABC records a journal entry for the purchase by debiting Investment in XYZ Corp. for USD 50,000 and crediting Cash for USD 50,000.
    • The investment in XYZ Corporation is reported at cost in the asset section of the balance sheet.
    • Assume XYZ Corporation declares a dividend of USD 1 per share.
    • The investment in XYZ Corporation is reported at cost in the asset section of the balance sheet.
    • Assume XYZ Corporation declares a dividend of USD 1 per share.
  • Reporting for a Combined Entity

    • The following is an example of how to calculate consolidated net income -- assume ABC Corporation owns 80% of XYZ Corporation; the remaining 20% is a non-controlling ownership interest.
    • Net Income for 201X for ABC is USD 20,000 and for XYZ net income is USD 8,000.
    • ABC's net income for the year includes 80% of XYZ's net income, or USD 6,400.
    • The consolidated net income for both companies after this adjustment is USD 21,600 (20,000 - 6,400 + XYZ's total net income of 8,000).
    • Therefore, consolidated income for ABC and its controlling interest in XYZ is USD 20,000 (21,600 - 1,600).
  • Calculating Fair Value

    • An example of how to determine fair value can involve the purchase of company shares of less than 20% total equity -- assume ABC Corporation purchases 10% of XYZ's Corporation's common stock, or 50,000 shares.
    • ABC records a journal entry for the purchase by debiting Investment in XYZ Corp. for USD 50,000 and crediting Cash for USD 50,000.
    • An example of how to determine fair value can involve the purchase of company shares of less than 20% total equity -- assume ABC Corporation purchases 10% of XYZ's Corporation's common stock, or 50,000 shares.
    • ABC records a journal entry for the purchase by debiting Investment in XYZ Corp. for USD 50,000 and crediting Cash for USD 50,000.
  • Evaluating Currency Swaps

    • For example, Company XYZ enters into a 10-year swap agreement with a dealer.
    • If Company XYZ liquidates the swap, the company must receive $61.9 million to sell the swap.
    • Company XYZ benefited because the company is exchanging dollars for appreciating euros.
  • Chapter Questions

    • Company XYZ enters into a 5-year swap agreement with a dealer, and four years have passed.
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