![Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk
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Answer to Discussion Question
Do we have a gain or what?
This case demonstrates the differing kinds of information provided through application of current
accounting rules for foreign currency transactions and derivative financial instruments.
The Ahnuld Corporation could have received $200,000 [$2.00 x 100,000 tchecks] from its export
sale to Tcheckia if it had required immediate payment. Instead, Ahnuld allows its customer six
months to pay. Given the future exchange rate of $1.70, Ahnuld would have received only
$170,000 if it had not entered into the forward contract. This would have resulted in a decrease in
cash inflow of $30,000. In accordance with current accounting standards, the decrease in the value
of the tcheck receivable is recognized as a foreign exchange loss of $30,000. This loss represents
the cost of extending credit to the foreign customer if the tcheck receivable is left unhedged.
However, rather than leaving the tcheck receivable unhedged, Ahnuld sells tchecks forward at a
price of $180,000. Because the future spot rate turns out to be only $1.70, the forward contract
provides a benefit, increasing the amount of cash received from the export sale by $10,000. In
accordance with current accounting standards, the change in the fair value of the forward contract
(from zero initially to $10,000 at maturity) is recognized as a gain on the forward contract of
$10,000. This gain reflects the cash flow benefit from having entered into the forward contract, and
is the appropriate basis for evaluating the performance of the foreign exchange risk manager.
(Students should be reminded that the forward contract will not always improve cash inflow. For
example, if the future spot rate were $1.85, the forward contract would result in $5,000 less cash
inflow than if the transaction were left unhedged.)
The net impact on income resulting from the fluctuation in the value of the tcheck is a loss of
$20,000. Clearly, Ahnuld forgoes $20,000 in cash inflow by allowing the customer time to pay for
the purchase, and the net loss reported in income correctly measures this. The $20,000 loss is
useful to management in assessing whether the sale to Tcheckia generated an adequate profit
margin, but it is not useful in assessing the performance of the foreign exchange risk manager. The
net loss must be decomposed into its component parts to fairly evaluate the risk manager’s
performance.
Gains and losses on forward contracts designated as fair value hedges of foreign currency assets
and liabilities are relevant measures for evaluating the performance of foreign exchange risk
managers. (The same is not true for cash flow hedges. For this type of hedge, performance should
be evaluated by considering the net gain or loss on the forward contract plus or minus the forward
contract premium or discount.)](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-8-320.jpg)
![Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk
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7. D (Calculate foreign exchange gain/loss)
The merchandise purchase results in a foreign exchange loss of $8,000, the
difference between the U.S. dollar equivalent at the date of purchase and at
the date of settlement.
The increase in the dollar equivalent of the note’s principal results in a
foreign exchange loss of $20,000.
The total foreign exchange loss is $28,000 ($8,000 + $20,000).
8. D (Forward contract cash flow hedge of foreign currency denominated
asset/liability)
The Thai baht is selling at a premium (forward rate exceeds spot rate). The
exporter will receive more dollars as a result of selling the baht forward than
if the baht had been received and converted into dollars on April 1. Thus, the
premium results in additional revenue for the exporter.
9. D (Forward contract fair value hedge of foreign currency firm commitment)
The parts inventory will be recognized at the spot rate at the date of receipt
(FC100,000 x $.23 = $23,000).
10. D (Determine the fair value of a forward contract)
The forward contract must be reported on the December 31, 2015 balance
sheet as a liability. Barnum has locked-in to purchase ringgits at $0.042 per
ringgit but could have locked-in to purchase ringgits at $0.037 per ringgit if it
had waited until December 31 to enter into the forward contract. The forward
contract must be reported at its fair value discounted for two months at 12%,
which is $4,901.50 [($.042 – $.037) x 1,000,000 x .9803].
11. C (Calculate foreign exchange gain/loss on foreign currency transaction)
The 10 million won receivable has changed in dollar value from $35,000 at
12/1/15 to $33,000 at 12/31/15. The won receivable will be written down by
$2,000 and a foreign exchange loss will be reported in 2015 income.
12. B (Forward contract fair value hedge of foreign currency denominated
asset/liability)
The nominal value of the forward contract on December 31, 2015 is a positive
$2,000, the difference between the amount to be received from the forward
contract actually entered into, $34,000 ($.0034 x 10 million), and the amount
that could be received by entering into a forward contract on December 31,
12. (continued)](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-13-320.jpg)
![Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk
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2015 that matures on March 31, 2016, $32,000 [$.0032 x 10 million]. The fair
value of the forward contract is the present value of $2,000 discounted for
three months, which is $1,941.20 [$2,000 x .9706]. On December 31, 2015,
MNC Corp. will recognize a $1,941.20 gain on the forward contract and a
foreign exchange loss of $2,000 on the won receivable. The net impact on
2015 income is –$58.80.
13. A (Forward contract cash flow hedge of forecasted foreign currency
transaction)
The krona is selling at a premium in the forward market, causing Pimlico to
pay more dollars to acquire kroner than if the kroner were purchased at the
spot rate on March 1. Therefore, the premium results in an expense of
$10,000 [($.12 – $.10) x 500,000].
The Adjustment to Net Income is the amount accumulated in Accumulated
Other Comprehensive Income (AOCI) as a result of recognizing the Premium
Expense and the fair value of the forward contract. The journal entries would
be as follows:
3/1 no journal entries
6/1 Premium Expense $10,000
AOCI $10,000
AOCI $2,500
Forward Contract $2,500
Foreign Currency $57,500
Forward Contract 2,500
Cash $60,000
AOCI $7,500
Adjustment to Net Income $7,500
14. C (Option cash flow hedge of forecasted foreign currency transaction)
This is a cash flow hedge of a forecasted transaction. The original cost of the
option is recognized as an Option Expense over the life of the option.](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-14-320.jpg)
![Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk
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15-17. (Option fair value hedge of a foreign currency firm commitment)
15. B
16. D
The easiest way to solve problems 15 and 16 is to prepare journal entries for
the option fair value hedge and the firm commitment. The journal entries are
as follows:
9/1/15
Foreign Currency Option $2,000
Cash $2,000
12/31/15
Foreign Currency Option $300
Gain on Foreign Currency Option $300
Loss on Firm Commitment $980.30
Firm Commitment $980.30
[($.79 – $.80) x 100,000 = $1,000 x .9803 = $980.30]
Net impact on 2015 net income:
Gain on Foreign Currency Option $300.00
Loss on Firm Commitment (980.30)
$(680.30)
3/1/16
Foreign Currency Option $700
Gain on Foreign Currency Option $700
Loss on Firm Commitment $2,019.70
Firm Commitment $2,019.70
[($.77 – $.80) x 100,000 = $3,000 – $980.30 = $2,019.70]
Foreign Currency (C$) $77,000
Sales $77,000
Cash $80,000
Foreign Currency (C$) $77,000
Foreign Currency Option 3,000
Firm Commitment $3,000
Adjustment to Net Income $3,000](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-15-320.jpg)
![Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk
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18-20. (continued)
4/30 Loss on Forward Contract $250
Forward Contract $250
[Fair value of Forward Contract is
(($.120 – $.118) x 500,000) = $1,000;
$1,000 – $1,250 = $250]
Firm Commitment $250
Gain on Firm Commitment $250
Foreign Currency (pesos) $59,000
Sales [500,000 pesos x $.118] $59,000
Cash [500,000 x $.120] $60,000
Foreign Currency (pesos) $59,000
Forward Contract 1,000
Firm Commitment $1,000
Adjustment to Net Income $1,000
Net impact on second quarter net income is: Sales $59,000 – Loss on Forward
Contract $250 + Gain on Firm Commitment $250 + Adjustment to Net Income
$1,000 = $60,000.
18. A
19. C
20. B Cash inflow with forward contract [500,000 pesos x $.12] $60,000
Cash inflow without forward contract [500,000 pesos x $.118] 59,000
Net increase in cash flow from forward contract $ 1,000](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-17-320.jpg)
![Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk
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21-22. (Option cash flow hedge of a forecasted foreign currency transaction)
The easiest way to solve problems 21 and 22 is to prepare journal entries for
the option cash flow hedge of a forecasted transaction. The journal entries
are as follows:
11/1/15
Foreign Currency Option $1,500
Cash $1,500
12/31/15
Option Expense $400
Foreign Currency Option $400
(The option has no intrinsic value at 12/31/15 so the entire change in fair
value is due to a change in time value; $1,500 – $1,100 = $400 decrease in
time value. The decrease in time value of the option is recognized as an
expense in net income.)
Option Expense decreases net income by $400.
2/1/16
Option Expense $1,100
Foreign Currency Option 900
Accumulated Other Comprehensive Income (AOCI) $2,000
(Record expense for the decrease in time value of the
option; $1,100 – $0 = $1,100; and write-up option to fair
value ($.40 – $.41) x 200,000 = $2,000 – $1,100 = $900.)
Foreign Currency (BRL) [200,000 x $.41] $82,000
Cash [200,000 x $.40] $80,000
Foreign Currency Option 2,000
Parts Inventory $82,000
Foreign Currency (BRL) $82,000
Accumulated Other Comprehensive Income (AOCI) $2,000
Adjustment to Net Income $2,000](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-18-320.jpg)
![Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk
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21-22. (continued)
Net impact on 2016 net income:
Option Expense $ (1,100)
Cost-of-Goods-Sold (82,000)
Adjustment to Net Income 2,000
Decrease in Net Income $ (81,100)
21. B
22. C
23. (10 minutes) (Foreign currency payable -- import purchase)
a. The decrease in the dollar value of the LCU payable from November 1 (60,000
x .345 = $20,700) to December 31 (60,000 x .333 = $19,980) is recorded as a
$720 foreign exchange gain in 2015.
b. The increase in the dollar value of the LCU payable from December 31
($19,980) to January 15 (60,000 x .359 = $21,540) is recorded as a $1,560
foreign exchange loss in 2016.
24. (10 minutes) (Foreign currency receivable – export sale)
a. The ostra receivable decreases in dollar value from (50,000 x $1.05) $52,500
at December 20 to $51,000 (50,000 x $1.02) at December 31, resulting in a
foreign exchange loss of $1,500 in 2015.
b. The further decrease in dollar value of the ostra receivable from $51,000 at
December 31 to $49,000 (50,000 x $.98) at January 10 results in an additional
$2,000 foreign exchange loss in 2016.
25. (10 minutes) (Foreign currency receivable – export sale)
9/15 Accounts Receivable (FCU) [100,000 x $.40] $40,000
Sales $40,000
9/30 Accounts Receivable (FCU) $2,000
Foreign Exchange Gain $2,000
[100,000 x ($.42 – $.40)]
10/15 Foreign Exchange Loss $5,000
Accounts Receivable (FCU)
[100,000 x ($.37 – $.42)] $5,000
Cash $37,000
Accounts Receivable (FCU) $37,000
26. (10 minutes) (Foreign currency payable -- import purchase)](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-19-320.jpg)
![Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk
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12/1/15 Inventory $52,800
Accounts Payable (LCU) [60,000 x $.88] $52,800
12/31/15 Accounts Payable (LCU) [60,000 x ($.82 – $.88)] $3,600
Foreign Exchange Gain $3,600
1/28/16 Foreign Exchange Loss $4,800
Accounts Payable (LCU) [60,000 x ($.90 – $.82)] $4,800
Accounts Payable (LCU) $54,000
Cash $54,000
27. (15 minutes) (Determine U.S. dollar balance for foreign currency transactions)
Inventory and Cost of Goods Sold are reported at the spot rate at the date the
inventory was purchased. Sales are reported at the spot rate at the date of sale.
Accounts Receivable and Accounts Payable are reported at the spot rate at the
balance sheet date. Cash is reported at the spot rate when collected and the
spot rate when paid.
a. Inventory [50,000 pesos x 40% x $.17]..................................................... $3,400
b. COGS [50,000 pesos x 60% x $.17] .......................................................... $5,100
c. Sales [45,000 pesos x $.18]....................................................................... $8,100
d. Accounts Receivable [45,000 – 40,000 = 5,000 pesos x $.21]................ $1,050
e. Accounts Payable [50,000 – 30,000 = 20,000 pesos x $.21] ................... $4,200
f. Cash [(40,000 x $.19) – (30,000 x $.20)].................................................... $1,600](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-20-320.jpg)
![Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk
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28. (25 minutes) (Prepare journal entries for foreign currency transactions)
2/1/15 Equipment $17,600
Accounts Payable (L) [40,000 x $.44] $17,600
4/1/15 Accounts Payable (L) $17,600
Foreign Exchange Loss 400
Cash [40,000 x $.45] $18,000
6/1/15 Inventory $14,100
Accounts Payable (L) [30,000 x $.47] $14,100
8/1/15 Accounts Receivable (L) [40,000 x $.48] $19,200
Sales $19,200
Cost-of-Goods Sold $9,870
Inventory [$14,100 x 70%] $9,870
10/1/15 Cash [30,000 x $.49] $14,700
Accounts Receivable (L) [$19,200 x 3/4] $14,400
Foreign Exchange Gain 300
11/1/15 Accounts Payable (L) [$14,100 x 2/3] $9,400
Foreign Exchange Loss [20,000 x ($.50 – $.47)] 600
Cash [20,000 x $.50] $10,000
12/31/15 Foreign Exchange Loss $500
Accounts Payable (L) [10,000 x ($.52 – $.47)] $500
Accounts Receivable (L) [10,000 x ($.52 – $.48)] $400
Foreign Exchange Gain $400
2/1/16 Cash [10,000 x $.54] $5,400
Accounts Receivable (L) [10,000 x $.52] $5,200
Foreign Exchange Gain 200
3/1/16 Accounts Payable (L) [10,000 x $.52] $5,200
Foreign Exchange Loss 300
Cash [10,000 x $.55] $5,500](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-21-320.jpg)
![Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk
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30. (30 minutes) (Foreign currency borrowing)
a. 9/30/15 Cash $100,000
Note payable (dudek) [1,000,000 x $.10] $100,000
(To record the note and conversion of 1 million
dudeks into $ at the spot rate.)
12/31/15 Interest Expense $525
Interest Payable (dudek) $525
[1,000,000 x 2% x 3/12 = 5,000 dudeks x
$.105 spot rate]
(To accrue interest for the period 9/30 – 12/31/15.)
Foreign Exchange Loss $5,000
Note Payable (dudek) [1 m x ($.105 – $.10)] $5,000
(To revalue the note payable at the spot rate of
$.105 and record a foreign exchange loss.)
9/30/16 Interest Expense [15,000 dudeks x $.12] $1,800
Interest Payable (dudek) 525
Foreign Exchange Loss [5,000 dudeks x
($.12 – $.105)] 75
Cash [20,000 dudeks x $.12] $2,400
(To record the first annual interest payment,
record interest expense for the period 1/1 – 9/30/16,
and record a foreign exchange loss on the
interest payable accrued at 12/31/15.)
12/31/16 Interest Expense $625
Interest Payable (dudek) [5,000 dudeks x $.125] $625
(To accrue interest for the period 9/30 – 12/31/16.)
Foreign Exchange Loss $20,000
Note Payable (dudek) [1 m x ($.125 – $.105)] $20,000
(To revalue the note payable at the spot rate of
$.125 and record a foreign exchange loss.)](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-23-320.jpg)
![Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk
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30. (continued)
9/30/17 Interest Expense [15,000 dudeks x $.15] $2,250
Interest Payable (dudek) 625
Foreign Exchange Loss [5,000 dudeks x
($.15 – $.125)] 125
Cash [20,000 dudeks x $.15] $3,000
(To record the second annual interest payment,
record interest expense for the period 1/1 – 9/30/15,
and record a foreign exchange loss on the interest
payable accrued at 12/31/16.)
Note Payable (dudek) $125,000
Foreign Exchange Loss 25,000
Cash [1 m dudeks x $.15] $150,000
(To record payment of the 1 million dudek note.)
b. The effective cost of borrowing can be determined by considering the total
interest expense and foreign exchange losses related to the loan and comparing
this with the amount borrowed:
2015
Interest expense $525
Foreign exchange loss 5,000
Total $5,525 / $100,000 = 5.525% for 3 months
5.525% x 12/3 = 22.1% for 12 months
2016
Interest expense $2,425
Foreign exchange losses 20,075
Total $22,500 / $100,000 = 22.5% for 12 months
2017
Interest expense $2,250
Foreign exchange losses 25,125
Total $27,375 / $100,000 = 27.38% for 9 months
27.38% x 12/9 = 36.5% for 12 months
Because of appreciation in the value of the dudek, the effective annual
borrowing costs range from 22.1% – 36.5%.](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-24-320.jpg)
![the fate of Adriano has been partially cleared up by my friend Mr.
Rawdon Brown from the Sanuto Diaries, wherein it appears that he
safely reached Venice through Calabria, and that the occasion of his
unaccountable disappearance was a journey to the conclave on Leo's
death, not his flight from Rome in the present year, as stated by
Guicciardini, Valeriano, and Roscoe.[276]
Thus baffled in the field, and betrayed in the consistory, Leo found a
great effort necessary. On the 20th of June he wrote a letter to
Henry VIII., which has been published by Rymer, representing, in
vague generalities, and abusive terms, the outrages committed
against the dignity and temporal dominion of the Church by
relentless robbers and adversaries, and enjoining him to contribute
assistance, in the way to be orally explained by the bearer, a
predicant friar named Nicholas.[277] He also made renewed
instances with his other allies for more efficient aid against his
contumacious vassal in Umbria, and sent to levy six thousand Swiss.
In order to raise money for these new expenses, he, on the 26th of
June, created thirty-one cardinals, thus at once filling his treasury
with the price of their hats, and surrounding himself by chosen
adherents. Nor did he omit still more profligate expedients. He had
repeatedly profited by Maldonato's perfidy in the Urbino war, and
now offered him 10,000 ducats, with the dignity of cardinal to his
son, if he would deliver up Francesco Maria alive or dead.[278]
After the affair at Imperiale, the Papal troops keeping close in their
garrisons, Francesco Maria had recourse to a partisan warfare of
sallies and surprises, which greatly harassed them, but did not give
sufficient employment to his own somewhat unmanageable levies.
He had now ascertained from intercepted letters the full extent of
Maldonato's treason; but, ere he ventured upon making an example,
he thought it well to put his troops into good humour by a foraging
expedition, which should also free his own state from their
burdensome presence. Gian Paolo Baglioni, Lord of Perugia, had,
during the whole campaign, been in the field against the Duke with
three thousand men, and his relation and rival Carlo, exiled by his](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-26-320.jpg)
![or eight thousand ducats each. Corinaldo was saved by a well-timed
sally, but Jesi, contrary to the wish of Francesco Maria, was sacked
by his Spaniards, to whom his orderly and methodical way of laying
the country under contributions, and pillaging only the refractory,
was far from acceptable.
The lesson he had given to these free lances appears for a time to
have borne fruit, and the following report by Minio, of a conversation
with the Pontiff, affords honourable testimony to their steadiness,
whilst it exhibits very graphically the character of the contest at this
juncture. "I afterwards inquired of his Holiness if he had any news?
He told me Francesco Maria was encamped under a castle named
Corinaldo, situated in the Marca, and that infantry had been
detached from his Holiness's army for its defence, so he hoped not
to be disappointed; a trust wherein I think the Pontiff will be
deceived, as he was regarding the other places. I said to him, 'It is a
good sign, his inability to make any further progress, and merely
laying siege to a few inconsiderable castles;' and to this his Holiness
rejoined, 'He does it to raise money, as he did by the other places.'
He then told me that Don Ugo de Moncada had been with the
Spaniards, but was unable to make any settlement; adding, with an
air of surprise, 'I was willing to give them three arrears of pay, yet
they did not choose to come away, but despatched a friar to say that
should I undertake an expedition against the infidels, they are willing
to accept this offer, and serve.' I answered, that if so, they were
willing to fight against the infidels on the same terms for which they
now served Francesco Maria against the Holy See! The Pope evinced
little hope of an agreement with these Spaniards. On my observing,
'The Viceroy [Don Ugo] has quitted Naples, we know not wherefore,
unless it be to come to your Holiness's assistance,' he replied, 'They
do say they are coming to aid me;' and then continued, with a smile
on his lips, 'See what a mess this is! The French suspect these
Spaniards of playing them some trick, and the Spaniards fear lest
the French, through Francesco Maria, should attack them in the
kingdom of Naples.' In order to elicit something more, I said that I
deemed it mere suspicion on either side; and he replied, 'It is so.' I](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-29-320.jpg)
![next asked how his Holiness stood with the Swiss? and he answered,
'We shall have the Grisons, but the Cantons have not yet decided,
though they were to do so in a diet; at all events, I shall have some,
and I have sent them the pensions they required of me.'" On the
14th of July, two days after this despatch, Minio reports that Don
Ugo had been dismissed by the Spanish troops, drawn up in three
fine battalions, with the following reply: "That they did not intend to
desert Francesco Maria, unless war were waged [by him] against
their most Catholic King, or some attempt made to occupy the
kingdom of Naples, or unless his Holiness shall commence hostilities
against his most Christian Majesty; in any other event they meant to
keep their faith to Francesco Maria, and would in no respect fail
him."
From various passages in the same envoy's despatches, it is clear
that these jealousies, though here ridiculed by Leo, were shared by
himself in a high degree: his own policy being generally hollow and
Machiavellian, he looked for no longer measure of good faith from
his allies. Ever since interest had been made at Bologna by Francis I.
in behalf of the Duke of Urbino, the Pontiff regarded him as at heart
adverse to all nepotic schemes upon that principality; and, at this
particular juncture, suspicion was strengthened by a variety of
circumstances, singly of little moment. Among these, were the
retention by his Holiness of Modena and Reggio; the apparent slight
of passing, in the late wholesale distribution of cardinal's hats, over
Ludovico Canossa, who, while legate in France, had gained the
King's affections, more perhaps than was approved at the Vatican;
the dilatory advance of those French lances long since promised to
Lorenzo de' Medici; but most of all the adherence to the della Rovere
banner of the Gascons, who owed at least a nominal allegiance to
the French crown. Influenced by these doubts, and the apparently
interminable expenses of this miserable and mismanaged contest,
the Pope so far lost heart, about the end of July, as to hint at an
accommodation.](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-30-320.jpg)
![The Duke of Urbino's next move was to repeat at Fermo his Perugian
policy of restoring an exiled faction, by expelling Ludovico Freducci,
then head of the government, who after a gallant struggle suffered a
complete rout, with the loss of six hundred slain. The Duke then
directed his march upon Ascoli, but was recalled by learning the
approach of two thousand Swiss to reinforce the papal troops.
Hurrying to intercept them, he by forced marches suddenly
appeared near Rimini, where he found that, simultaneously with
their arrival, M. de l'Escu had at length brought up his three hundred
French gens-d'-arms, with instructions from Francis to arrange, if
possible, some issue to this unhappy war. Nor was the Legate
disinclined to the proposal, for the Pontiff had been playing a ruinous
game, which disgusted his allies, alienated his subjects, and drained
his treasury.
An interview was, therefore, held at the monastery of La Colonella,
between the Duke, Cardinal Bibbiena, and the French captain. A
guarantee of 10,000 ducats of income in any residence he should
select was offered to Francesco Maria, if he would resign his state.
But he declared himself ready to die rather than so to sell it and his
honour, avowing, however, that if the Pope were resolved to deprive
him of his sovereignty on account of the Cardinal's slaughter, he
would abdicate in favour of his infant son, and carry his army to
Greece, to fight for the recovery of Constantinople. When
negotiations had been thus broken off, as described by Giraldi, the
smooth-tongued churchman, nothing abashed by the contrast of
their early familiarity with their present circumstances, invited him to
partake of a splendid collation. This he courteously declined, and
retired to breakfast with l'Escu, answering the Cardinal's
remonstrances by a jesting but pungent remark, that "priests kill
with wine-cups, soldiers with the sword." The Duke making
somewhat minute inquiries as to the Swiss reinforcements, the
Legate laughingly asked, "if he destined for them such a supper as
he provided for the Germans and Spaniards at the Imperiale"; to
which he rejoined, "And why not, if they are my foes?"[279] Nor was
the taunt lost upon him. Next night he led his men through the](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-31-320.jpg)
![surprised and pillaged to the value of 2000 scudi. "But if the
wretches sinned at Fabriano, they did penance at Ripatrasone; for, in
trying to sack it also, many of them were slain, and the survivors
were taken to Gerbe, in Africa, where they nearly all died,—some
from drinking too much, some from drinking too little. The former by
great good luck were drowned, and the latter, marching through that
country in the parching summer heats, with water scarce, and no
wine, perished of thirst; so that they had better have followed the
Duke to marvellous enterprises and mighty gains, rather than have
left to the world a degraded name." There is something quaint in the
concentrated rancour wherewith Giraldi thus dismisses these selfish
adventurers; and not less so in the following rustic memorial.
Grateful for their escape, comparatively scathless, from perils which
nearly menaced them, the people of Maciola, a village two miles
from Urbino, placed in their church a votive picture to the Madonna,
which is still inscribed with these simple verses:—
"A horrible war [raged] in the state of Urbino,
In fifteen hundred and seventeen,
[With] many troops brave and chosen
Led by the Duke Lorenzino,
When Francesco Maria into his duchy
Was returned, with capital troops,
Spaniards, Mantuans, and other clans,
Each one a paladin in arms;
Urbino then, and all the district,
Being in great peril and dread.
Oh, Virgin Mother! ever kind to us,
Often did the host approach our walls,
And God alone it was who defended them:
Therefore has been dedicated to thee this image by thy worshippers
Of Maciola, with their grateful vows."
In the war thus concluded, Francesco Maria struggled for eight
months, single-handed and penniless, against the temporal and
spiritual influence of the Holy See, backed by all the continental](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-35-320.jpg)
![Germany. Little as the balance of power was then comprehended in
European policy, this young monarch's rapid acquisitions called forth
many jealousies. Francis had a double motive for standing forward
as a competitor for the empire;—the dignity was flattering to his
gallant character and ambitious views, and he grudged it to a
younger rival, whose overgrown territory already hemmed him in on
every side. Leo, at heart disliking them equally, as ultramontane
sovereigns formidable to Italy, on the ruins of whose freedom were
based the successes of either, sought to play them off against each
other, so as to weaken and embarrass both. But in spite of these
intrigues, Charles was elected emperor on the 28th of June, 1519,
when but nineteen years of age.
The Pope had covertly supported the claims of Francis, with whom
he intended some ulterior combination for expelling the Spaniards
from Lower Italy. But the accession of strength which their sovereign
thus acquired gave Leo an excuse for changing sides, an evolution
grateful to his faithless nature. The struggle was once more to be
made in Lombardy, and, as Charles was bent upon wresting the
Milanese from his rival, the opportunity seemed tempting of
recovering Parma and Piacenza for the Church by his means. To men
in the Duke of Urbino's desperate position, any convulsion would be
welcome, as offering the chance of better things. The impression left
by his biographers, that he maintained a cautious neutrality in the
contest thus opening, is disproved by some documents in the
Bibliothèque du Roi, which establish him as a retained adherent of
the French monarch.[280] One of them is an undated draft of articles
proposed by him, his nephew Sigismondo Varana, Camillo Orsini, the
Baglioni, and the Petrucci, as conditions of their entering the service
of Francis, with the usual pay and allowances. They stipulated for his
constant protection and support in the recovery of their respective
states, and for the restoration of various allodial fiefs claimed by
them in Naples, as soon as Francis should, with their aid, regain that
kingdom. Francesco Maria, finding it necessary to quit the territory
of his brother-in-law Federigo, now Duke of Mantua, who had been
named captain-general of the ecclesiastical forces, and to surrender](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-40-320.jpg)
![the allowance of 3000 scudi, hitherto made by him for the Duchess's
maintenance, asked a pension of equal amount from his new ally,
together with 1500 scudi in hand, to meet the expense of removing
his family to a place of security, probably Goito. He accompanied
these overtures with a plan for very extended operations upon
Central Italy, whereby, with the assistance of Venice and Genoa,
armaments by sea and land were to be directed in overwhelming
force, at once against Tuscany and the Papal States. The result of
this negotiation does not appear, but the only one of its provisions
which seems to have taken effect was the Duke's pension, for which
he writes thanks to the French Monarch from the camp of Lautrec on
the Taro, the 27th of September, 1521. Giraldi mentions that he
suddenly quitted the French service in consequence of a slight from
Lautrec at a council of war, and he appears then to have retired to
Lonno on the Lago di Guarda. From that lovely spot he watched the
course of events, until the wheel of fortune should bring round his
turn. The ladies of his family meanwhile lived in great seclusion at
Mantua, and on the 19th of July, 1521, the dowager Duchess writes
him, that she and his consort frequented the convents, soliciting
from the nuns their prayers that God would direct his counsels, and
vouchsafe the fulfilment of his wishes.[281] As the strife approached,
these distinguished ladies withdrew to Verona. Upon its progress we
need not dwell. By his oppressive sway Lautrec had rendered the
French name odious at Milan, and when the confederate army
approached its walls, bringing with them Francesco Sforza, second
son of Ludovico il Moro, and brother of Maximiliano their last native
sovereign, the people hailed them as liberators, and expelled their
foreign masters.](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-41-320.jpg)
![N
CHAPTER XXXVII
Death of Leo X.—Restoration of Francesco Maria—He
enters the Venetian service—Louis XII. invades the
Milanese—Death of Bayard—The Duke’s honourable
reception at Venice—Battle of Pavia.
EWS of the evacuation of Milan by the French reached Leo X.
at his hunting-seat of La Magliana, five miles down the Tiber
from Rome. Though not quite well, he hurried to his capital
on the 24th of November, to witness the bonfires and rejoicings at
their discomfiture, and on the morning of the 1st of December was
found dead in bed.[*282] The mystery attending this sudden death of
one in the prime of life has never been cleared up. Suspicions of
poison were rife at the time, and have not been removed; they point
at the Duke of Urbino or of Ferrara, whom he had grievously
outraged, or at Francis I., whom he recently disgusted, as its
probable but undetected author. In absence of tangible accusation or
tittle of evidence, it seems needless to repel such a charge from
Francesco Maria, especially as other accounts impute the Pontiff's
dissolution to malaria fever, to a severe catarrh,[283] to debauchery,
or even to excessive exultation at the joyful news. So unexpected
was the event that there was not time to administer the last
sacrament, a circumstance which gave occasion to this bitter
epigram, in allusion to the notorious venality of church privileges
during his reign:—
"Why were not Leo's latest hours consoled
By holy rites? such rites he long had sold."[284]
Tidings so momentous to Francesco Maria reached him when on a
visit to the Benedictine monastery at Magusano, on the Lago di
Garda. He had audience on the same day with Lautrec and Gritti, the](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-42-320.jpg)
![French and Venetian commanders, who bade him God-speed.
Hurrying to his consort at Verona, he there spent two days in
consulting with such friends as were at hand, and despatching
courtiers to others, his resolution being taken to strike a speedy
blow for recovery of his state. The impoverished finances of the
papacy encouraged the attempt, and he was quickly in
communication with Malatesta and Orazio Baglioni, who had been in
like manner despoiled of Perugia. But before assuming offensive
operations, he commissioned a special envoy to lay before the
conclave a statement of his grievances, and a justification of the
measures he was about to pursue.[285] In two days more he
reached Ferrara, with the Baglioni, at the head of three thousand
foot and above five hundred horse. On the 16th he was at Lugo,
where, and all along his route by Cesena, numerous reinforcements
poured in. "His subjects," to borrow the words of Muratori, "desired
and expected him with clasped hands, because they loved him
beyond measure for his gracious government." Anticipating a
renewal of his "Saturnian reign," they, on his approach, flew to arms,
threw the lieutenant of Urbino out of the palace window, and
welcomed him with the well-known cry of "Feltro! Feltro! the Duke!
the Duke!"
Pesaro received him on the 22nd, after a slight hesitation as to their
relations with the Church; but the citadel was held by eighty men,
there being no artillery at hand to bring against it. In absence of
cannon-balls, it was carried by paper pellets thrown in from cross-
bows, on which were written offers of a thousand scudi to the
castellan, and twenty-five to each soldier. The terms were accepted,
and the money advanced by Alfonso of Ferrara. On the day of the
Duke's arrival there, a deputation from Urbino laid its homage at his
feet, and, being thus secure of his own subjects, he turned to
succour his friends. Taught by the lesson of three successive
pontificates, whose policy it had been to crush the feudatories of
Umbria, he saw the necessity of making common cause with such of
these as still maintained a precarious independence. He therefore
undertook the re-establishment of his nephew, Sigismondo Varana,](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-43-320.jpg)
![and of the Baglioni, ere he devoted himself to the consolidation of
his own authority. After two days' repose in Pesaro, he marched by
La Pergola to Fabriano, where, hearing that Sigismondo had been
cordially received at Camerino, he, on the 28th, turned towards
Perugia, and, by the 5th of January, had reinstated the Baglioni,
notwithstanding a spiritless resistance by their uncle Gentile, and by
the vacillating Vitelli. Contrary to his own judgment,—but, as we
shall presently see, by a happy chance,—he was induced to
accompany his Perugian allies with seven thousand men in a foray
upon Tuscany, for the double purpose of annoying the Medici, by
whom Gentile was supported, and of re-establishing Pandolfo
Petrucci as tyrant of Siena.[*286] When, however, he found no
responding movement from within, and that the army of Giovanni
delle Bande Nere was hovering in the neighbourhood, he withdrew
to Bonconvento, and endeavoured to gain credit for his forbearance
by despatching to the magistracy of that city the following oily
missive:—
"Most illustrious and most excellent Lords, much
honoured Fathers:
"The true, ancient, and cordial friendship which has
ever existed between your lofty republic and my most
illustrious house, and the recollection I retain how
invariably my distinguished predecessors have been
united in special good-will with your city of Siena,
induce me, being of the same sentiments, to follow in
the steps of my said most eminent ancestors, resolving
that there shall never be any failure on my part
towards your noble commonwealth. And in order that
your Excellencies may at present have some proof of
this, I have, for the peace and order of your town,
adopted the resolution which your envoys will
comprehend from the tenor hereof, and which I feel
assured cannot be otherwise than welcome and
acceptable to you. I therefore pray you not only readily](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-44-320.jpg)
![to give the like credence to what these envoys will tell
you on my part, as you would to myself, but also to
bear in mind the close and affectionate amity wherein
I am most ready to persevere, nor on your side
restrain or fall short of our wonted and long-
established kindliness, increasing, and, if possible,
extending it by an ampler interchange of charity; for
you will assuredly ever find me prepared and ready to
benefit and uphold your republic as much as your
Excellencies could ever desire, to whom I offer and
commend myself. From Bonconvento, the 15th of
January, 1522.
"Franciscus Maria Dux Urbini."[287]
In truth, the Duke's own affairs required his full attention, for the
power of the Medici, though shaken, was still formidable, and its
natural representative, the Cardinal Giulio, was influential in the
Sacred College, and almost sovereign at Florence. Francesco Maria
therefore observed a prudent neutrality, when the Bande Nere
advanced to support the claims of Gentile Baglioni upon Perugia.
These, being warned off the ecclesiastical territory by the consistory,
turned up the valley of the Tiber, and, passing the Apennines, made
a descent upon Montefeltro, where they plundered until the end of
February,—an outrage for which the Cardinal was greatly blamed, as
a convention had already been signed between him and the Duke
for their respective states of Florence and Urbino. Much light is
thrown upon these very complicated transactions by a careful
examination of Castiglione's letters. To his dexterous diplomacy that
convention seems to have been chiefly owing. He endeavoured to
clench the reconciliation by an engagement for Francesco Maria in
the Florentine service, and a marriage between Prince Guidobaldo of
Urbino and Caterina de' Medici, daughter of Lorenzo, and heiress of
his pretensions. The failure of this plan, from backwardness on the
part of the Cardinal rather than of the Duke, was, perhaps, fortunate
for the intended bridegroom's domestic peace; and the contending](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-45-320.jpg)
![claims which it was meant to solve never ripened into importance.
The condotta had a better issue: avowedly for but one year, it seems
to have been intended rather to neutralise a troublesome foe than
with the idea of calling the Duke's service into actual requisition.
Indeed, although he was nominally captain-general, with 9000
ducats of pay, besides 100 broad scudi for each of his two hundred
men-at-arms in white uniform (three mounted soldiers counting as
one man-at-arms), this was expressly their peace establishment and
pay, to be increased in case of war.[288] Castiglione's success in
these arrangements was facilitated by his having confided to
Cardinal Giulio a refusal at this time, by Francesco Maria, of very
flattering proposals from the French court, and the same good
offices extended to disabusing the Duke in the eyes of Emanuel, the
imperial ambassador, who, believing him committed to Francis, was
countermining his interests in the consistory, and with the Cardinal.
Whilst immersed in these transactions, the election in which he was
so deeply interested came suddenly to a conclusion, brought about
indirectly by his means. The choice of the conclave astonished Italy,
for it fell upon an ultramontane cardinal, unknowing and unknown in
Rome. Adrian Florent,[*289] a Fleming of humble birth, was a man of
mild temper, peaceful habits, and literary tastes. He had been
preceptor of Charles V., and held the see of Tortosa. This selection
so curiously illustrates the haphazard results, which have not
unfrequently baffled both policy and intrigue in papal elections, that
we may pause for a moment on the circumstances alleged by
Guicciardini to have brought it about. The Medicean party had not
strength, at once, to carry their Cardinal, in the face of the old
members of the College, who were adverse from introducing the
hereditary principle into their selection, yet hoped in time to exhaust
the patience or the strength of their seniors. But whilst Medici and
Petrucci were thus ingeniously devising delays, news reached them
of the Duke of Urbino's descent upon Tuscany, causing them
respectively to tremble for their supremacy in Florence and Siena,
and to question the policy of procrastinating at the Quirinal, whilst
interests so momentous were elsewhere in peril. In this state of](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-46-320.jpg)
![matters the Cardinal of Tortosa "was proposed, without any intention
of choosing him, but that the morning might be wasted; whereupon
his eminence of San Sisto, in an endless oration, enlarged upon his
virtues and learning, until some of the members beginning to
accede, the others successively followed with more impetuosity than
deliberation, whereby he was unanimously then chosen Pope. The
very electors could allege no reason why, at a crisis of such
convulsions and perils for the papacy, they had selected a barbarian
pontiff, so long absent, and recommended neither by previous
deserts, nor by intimacy with any of the conclave, to whom he was
scarcely known by name, having never visited Italy, nor had he any
wish or hope to do so."[290] The Roman populace resented a choice
which they felt as an insult, and as the cardinals emerged from
durance, they were assailed by execrations of the mob.[*291]
Francesco Maria had every reason to be gratified by an election he
had most unwittingly influenced, for the exclusion of Cardinal Giulio
was of vast importance to his interests, which must have been
seriously compromised by the nomination of a hostile pontiff, at a
moment when his affairs were in so precarious a juncture. He
accordingly lost no time in accrediting to Adrian VI. in Spain, an
envoy who pleaded his cause to such good purpose, that a bull was
issued on the 18th of May, reinstating him in all his honours,
including the prefecture of Rome, which, on the death of Lorenzo,
had been conferred upon Giovanni Maria Varana, uncle of
Sigismondo, whose state he had usurped under the sanction of Leo.
Meanwhile his respectful and judicious demeanour had obtained
from the Sacred College, before the Pope's arrival, an
acknowledgment of his rights, upon the following conditions, dated
at Rome, the 18th of February. "The Lord Duke of Urbino promises
to accept neither pay, engagement, nor rank from any prince or
power, and to take service only with the Apostolic See, should he be
required; but if not called upon by it, to attach himself to no party
without leave and sanction from the Pope, and the Holy See, as
represented ad interim by the Sacred College. Also, he renews his
obligation in future never to oppose the papal state; and further, for](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-47-320.jpg)
![due observance of these terms, and more ample assurance of his
Holiness and the Apostolic See, he binds himself within one month
to deposit his only son as a hostage, in the hands of the Marquis of
Mantua, captain-general of the ecclesiastical troops. On the other
hand, the Sacred College undertakes to defend and protect the Lord
Duke's person, as well as to maintain him in peaceful possession of
the castles, fortresses, cities, and towns, held by him now or before
his deprivation; and further, to use influence with our Lord the Pope
for his reinvestment in the same, on the terms of his former tenure."
[292]
Nor was it only from the Medicean faction that the Duke's tranquillity
was threatened. Whilst his fortunes were yet in suspense, he was
warned by Castiglione, then diplomatic resident at Rome for his
brother-in-law the Duke of Mantua, that Ascanio Colonna was
agitating certain vague pretensions on the duchy of Urbino, through
his mother Agnesina di Montefeltro. The nature of these claims,
which were from time to time revived, is not very intelligible. All
authorities make Giovanna, wife of the Prefect, older than Agnesina,
wife of Fabrizio Colonna, both being daughters of Duke Federigo.
Thus, even supposing Francesco Maria's title irretrievably annulled,
by the deprivations he had successively sustained from Julius II. and
Leo X., if the old investitures did confer any rights upon females, his
nephew Sigismondo Varana, grandson of Giovanna, would have
excluded the Colonna. Ascanio's intrigues were, however, neutralised
by the dexterity of Castiglione, and the influence of the Duke of
Mantua, until Francesco Maria's cordial reconciliation with the Church
and the Emperor had rendered his position secure.[293] Even the
Medici thereupon refused to promote the pretender's views, and his
only adherent was Gian Maria Varana, who, having within a few
weeks succeeded in recovering possession of Camerino, sought so to
occupy the Duke of Urbino as to prevent his espousing the cause of
Sigismondo, its rightful lord. The latter also looked for support to his
wife's uncle, Cardinal Prospero Colonna, whilst the interests of his
competitor were backed by Cardinal Innocenzo Cibò, his brother-in-
law. But ere these respective claims could be tested, they were sadly](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-48-320.jpg)
![humbling his rival Francis I. The result was a new confederation, to
which the Pope, the Emperor, Henry VIII., Venice, Milan, and
Florence were parties, but which brought on a general war, the very
evil it was intended to avert. Francesco Maria's condotta with the
Florentines being expired, he was named to succeed Teodoro
Trivulzio, whose supposed French tendencies occasioned his removal
from command of the Venetian troops. Those of the Church were
committed to the Marquis of Mantua, and Prospero Colonna was
general-in-chief of the League Lautrec and l'Escu[294] having been
recalled, the Admiral Gouffier de Bonnivet was sent into Lombardy to
make good the title of his master to the Milanese, whose daring
spirit looked not beyond the glory of encountering single-handed the
armies of Europe. This struggle, eventually so ruinous to Italy, so
fatal to Rome, had scarcely commenced ere Adrian was called from
events which he was in no respect fitted to direct. He died on the
24th of September, 1523,[*295] and was succeeded on the 19th of
November by the Cardinal de' Medici, as Clement VII., whose first
act was an adherence to the League.
Prospero Colonna did not long survive the Pontiff. From him,
perhaps, Francesco Maria adopted the over-cautious policy which
marked his military manœuvres during the remainder of his life, and
which contrasts strongly with the dashing valour of his early career.
For this he has been severely blamed by Sismondi, and we shall see
it attended with very miserable results. Fortunately for the Duke's
fame, his reputation in arms had been firmly established before the
later and more important years of his military prowess arrived. Ere
the allies had completed their preparations, the French poured into
Lombardy, carried Lodi, and laid siege to Cremona. The Venetian
troops occupied the banks of the Oglio, where they were joined by
the Duke of Urbino, as soon as he had received credentials and
instructions from the senate; his own stipulated contingent, under
his lieutenant-general Landriano, having already effected a junction.
Machiavelli, ever prone to cast reflections on mercenary troops, has
remarked that the Republic lost her superiority from the time that](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-52-320.jpg)
![she extensively employed them. This, however, is but a partial view
of the case. By their means, backed by their maritime supremacy,
and by her matchless diplomatic system, she gradually extended her
mainland territory, in spite of the unmilitary genius of her people,
until jealousy combined nearly all Europe against her in the League
of Cambray. But there was another fault inherent in the organisation
of her armies. Dark suspicion was the permeating principle of her
policy. Each branch of the executive jealously watched the others.
Magistrates distrusted their colleagues; fathers set spies upon their
sons, husbands upon their wives; governors and governed doubted
their paid troops, or countermined their selected generals. The
senate accordingly sent with their stipendiary forces commissioners
instructed to watch, and empowered to control, the leaders—a check
necessarily inducing dissension, for, as Macaulay has happily
remarked, what army commanded by a debating club ever escaped
discomfiture and disgrace? Under the title of proveditori, these
official spies performed some of the duties belonging to
commissaries-general; and although this plan for controlling soldiers
of fortune, who owed little fidelity to the cause, and whose ruling
principle was usually self-interest, might seem the result of wise
precaution, it practically occasioned perpetual embarrassments, and
fomented personal quarrels, paralysing operations in the field. Such
an imperium in imperio had in this instance its usual results.
Distracted councils and divided responsibility hampered free action,
and rendered abortive the best-laid plans.[*296] Throughout the long
war now opening, the system was pregnant with peculiar mischief,
and it ought to bear much of the blame of that dilatory inefficiency
which is charged against Francesco Maria. Thus the Proveditore
Emo, at the very outset of this campaign, prevented him from
crossing the Oglio to harass the retreat of Renzo da Ceri, who, after
loitering away two months before Cremona, was recalled to the
siege of Milan. The Duke, however, soon after advanced to the Adda,
and during the rigour of winter occupied his troops in fortifying
themselves at Martinengo, from whence they were enabled to annoy
the enemy by continual forays towards Lodi.[297]](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-53-320.jpg)
![attack as might drive the enemy across the Alps. The indignant army
appealed to Francesco Maria to break through this official
obstruction, but the commissioner was right to the letter, and the
stern Signory sanctioned no latitude of construction on the part of its
servants. The Duke, however, gained his consent by private
remonstrances, at once temperate and energetic, but especially by
threatening to throw up his commission from the senate, and as a
free captain to pass with his own company into the allies' service,
leaving the Proveditore, with a disorganised contingent, to bear the
whole responsibility of losing so admirable an opportunity of cutting
short a struggle, which it was in every view the interest of his
republic to close.[298]
The conduct of the French troops devolved, in consequence of the
Admiral's wound, upon Piere de Terrail, Chevalier de Bayard, who
was not long spared in a command which the blunders of his
predecessor had rendered hopeless. On the 30th of April, whilst
drawing off the rear-guard under the enemy's fire, a shot fractured
his spine. Refusing to be carried from the spot, he had himself
supported against a tree, with his face to the foe, and continued to
give his orders with composure: at length, feeling the hand of death
upon him, he confessed himself to his faithful squire, kissing the
hand-guard of his sword as a substitute for the cross. The
imperialists remaining masters of the field, he was approached by
the Constable Bourbon, to whose words of sympathy and regret he
sternly replied, "Grieve not for me, but for yourself, fighting against
your king and country." His fall was reported to Charles V. by the
imperial envoy, Adrian de Croy, in these touching terms:—"Sire,
although the said M. Bayard was in the service of your enemy, his
death is certainly a pity; for he was a gentle knight beloved of all,
whose life had been as well spent as ever was that of any of his
condition, as, indeed, he fully testified at its close, which was the
most beautiful I ever heard tell of." Thus fell, in his forty-ninth year,
the flower of French chivalry, "the fearless and irreproachable
knight." His army evacuated Italy before the end of May, and the
Duke of Urbino being entrusted with the recovery of Lodi, found it](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-55-320.jpg)
![This festive welcome took place on the 25th of June. Next day being
Sunday, the Duke presented himself at the Collegio, dressed in black
damask over a white doublet, with a rose-coloured cap; a small
person, of indifferent presence [poca presentia]. He was received
outside of the audience-hall by the Doge and Signory; when
admitted, he spoke in a few words, and with low voice, of his
constant readiness to serve their state with life and limb. To which
the Doge replied, that he had acquitted himself well, but it was their
trust that he would do still better in future, and that, being fully
assured of his fidelity, they had selected him for captain-general. The
privileges of citizenship had been given him many years before, in
compliment to his uncle Guidobaldo, but the general's baton was to
be conferred upon him on the 2nd of July. In deference, however, to
the predictions of an astrologer, he requested that his investiture
might take place on the 29th of June, being St. Peter's day.
Accordingly, the magnates and diplomatic functionaries of the most
luxurious city in Christendom being assembled within its picturesque
and time-honoured cathedral, Francesco Maria, was led in,
magnificently arrayed in gold lama and damask, amid the din of
trumpets and bagpipes. After celebration of high mass, during which
he was seated on the Doge's left, the insignia, consisting of a silver
baton, and crimson standard with the lion in gold, were blessed at
the high altar, and consigned to his hands by the Doge, as badges of
authority, which he then swore to employ for the glory of God, and
for maintenance and defence of the Republic. This solemnity was
hailed by the spectators' shouts, the clang of bells, the crash of
martial music, the roar of artillery, and, as the Duke was conducted
to his gondola by a long procession of military and civil dignitaries,
the gorgeous piazza and gay canals displayed a splendour unwonted
even in Venice.
Unfavourable rumours of the Duchess's health rendered him
impatient to be done with these honours, and were probably the
true reason for his desiring that the installation might be
accelerated. But the fashionable club or company della Calza so
urged his remaining for their festival, which had been fixed for the](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-57-320.jpg)
![3rd in compliment to him, that he could not well refuse a short delay
in order to be present.[299] The sports were enacted on that usual
scene of Venetian magnificence, the grand canal, decked out in
many-tinted draperies, and thronged by gay parties. The club, with
the Duke of Urbino and other honoured guests, were conveyed in
two large flat barges, lashed together and beautifully curtained,
wherein assembled the most distinguished youths of both sexes,
who revelled in music and dancing as they glided along the glassy
surface. At length they stopped at the massive, but now crumbling,
Foscari palace, to witness a race of four-oared gondolas, and
concluded the entertainment with a supper on the Rialto. Next day
their sports were renewed, with addition of a déjeuner, where fancy
confections were presented to the principal guests—a triumphal
chariot to Francesco Maria, an eagle to the imperial ambassador, and
so forth.
On the 5th of July, after ten days spent in these monotonous
gaieties, the Duke returned to Pesaro in his twelve-oared barge; but
his repose there was brief, for the second act soon opened of that
bloody drama wherein the ambition of Charles and Francis involved
Italy. An incursion of imperialists into Provence under the renegade
Bourbon had shifted the scene to France; but the French monarch,
by a sudden movement across the Alps, transferred it once more
into Lombardy, and took possession of Milan. The Signory hastily
summoned their general from his duchy, to guard their frontier. The
established order of Italian policy, however, rendering it probable
that new and contradictory combinations would speedily arise, his
instructions were to act upon the defensive; and a like temporising
spirit prevailed in the councils of his Holiness, who secretly lent an
ear to proposals of Francis for a combined effort to shake off the
Spanish domination in Naples. The Duke's undecided tactics, so
condemned by Sismondi, were therefore in accordance with orders,
which the ever-present Proveditore took care were complied with.
He thus had no share in the great battle of Pavia, which crushed the
chivalry of France, accelerated the climax of Italian subjugation, and
rendered Spanish influence fatally paramount in Southern Europe. It](https://image.slidesharecdn.com/14863-250225093800-f53d29e9/85/Fundamentals-of-Advanced-Accounting-6th-Edition-Hoyle-Solutions-Manual-58-320.jpg)
Fundamentals of Advanced Accounting 6th Edition Hoyle Solutions Manual
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- 5. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-1 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. CHAPTER 7 FOREIGN CURRENCY TRANSACTIONS AND HEDGING FOREIGN EXCHANGE RISK Chapter Outline I. In today’s global economy, a great many companies deal in currencies other than their reporting currencies. A. Merchandise may be imported or exported with prices stated in a foreign currency. B. For reporting purposes, foreign currency balances must be stated in terms of the company’s reporting currency by multiplying it by an exchange rate. C. Accountants face two questions in restating foreign currency balances. 1. What is the appropriate exchange rate for restating foreign currency balances? 2. How are changes in the exchange rate accounted for? D. Companies often engage in foreign currency hedging activities to avoid the adverse impact of exchange rate changes. E. Accountants must determine how to properly account for these hedging activities. II. Foreign exchange rates are determined in the foreign exchange market under a variety of different currency arrangements. A. Exchange rates can be expressed in terms of the number of U.S. dollars to purchase one foreign currency unit (direct quotes) or the number of foreign currency units that can be obtained with one U.S. dollar (indirect quotes). B. Foreign currency trades can be executed on a spot or forward basis. 1. The spot rate is the price at which a foreign currency can be purchased or sold today. 2. The forward rate is the price today at which foreign currency can be purchased or sold sometime in the future. 3. Forward exchange contracts provide companies with the ability to “lock in” a price today for purchasing or selling currency at a specific future date. C. Foreign currency options provide the right but not the obligation to buy or sell foreign currency in the future, and therefore are more flexible than forward contracts. III. FASB Accounting Standards Codification Topic 830, Foreign Currency Matters (FASB ASC 830) prescribes accounting rules for foreign currency transactions. A. Export sales denominated in foreign currency are reported in U.S. dollars at the spot exchange rate at the date of the transaction. Subsequent changes in the exchange rate until collection of the receivable are reflected through a restatement of the foreign currency account receivable with an offsetting foreign exchange gain or loss reported in income. This is known as a two-transaction perspective, accrual approach. B. The two-transaction perspective, accrual approach also is used in accounting for foreign currency payables. Receivables and payables denominated in foreign currency create an exposure to foreign exchange risk; this is the risk that changes in the exchange rate over time will result in a foreign exchange loss.
- 6. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-2 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. IV. FASB Accounting Standards Codification Topic 815, Derivatives and Hedging (FASB ASC 815) governs the accounting for derivative financial instruments and hedging activities including the use of foreign currency forward contracts and foreign currency options. A. The fundamental requirement is that all derivatives must be carried on the balance sheet at their fair value. Derivatives are reported on the balance sheet as assets when they have a positive fair value and as liabilities when they have a negative fair value. B. U.S. GAAP provides guidance for hedges of the following sources of foreign exchange risk: 1. foreign currency denominated assets and liabilities. 2. unrecognized foreign currency firm commitments. 3. forecasted foreign denominated currency transactions. 4. net investments in foreign operations (covered in Chapter 10). C. Companies prefer to account for hedges in such a way that the gain or loss from the hedge is recognized in net income in the same period as the loss or gain on the risk being hedged. This approach is known as hedge accounting. Hedge accounting for foreign currency derivatives may be applied only if three conditions are satisfied: 1. the derivative is used to hedge either a cash flow exposure or fair value exposure to foreign exchange risk, 2. the derivative is highly effective in offsetting changes in the cash flows or fair value related to the hedged item, and 3. the derivative is properly documented as a hedge. D. Hedge accounting is allowed for hedges of two different types of exposure: cash flow exposure and fair value exposure. Hedges of (1) foreign currency denominated assets and liabilities, (2) foreign currency firm commitments, and (3) forecasted foreign currency transactions can be designated as cash flow hedges. Hedges of (1) and (2) also can be designated as fair value hedges. Accounting procedures differ for the two types of hedges. E. For cash flow hedges of foreign currency denominated assets and liabilities, at each balance sheet date: 1. The hedged asset or liability is adjusted to fair value based on changes in the spot exchange rate, and a foreign exchange gain or loss is recognized in net income. 2. The derivative hedging instrument is adjusted to fair value (resulting in an asset or liability reported on the balance sheet), with the counterpart recognized as a change in Accumulated Other Comprehensive Income (AOCI). 3. An amount equal to the foreign exchange gain or loss on the hedged asset or liability is then transferred from AOCI to net income; the net effect is to offset any gain or loss on the hedged asset or liability. 4. An additional amount is removed from AOCI and recognized in net income to reflect (a) the current period’s amortization of the original discount or premium on the forward contract (if a forward contract is the hedging instrument) or (b) the change in the time value of the option (if an option is the hedging instrument). F. For fair value hedges of foreign currency denominated assets and liabilities, at each balance sheet date: 1. The hedged asset or liability is adjusted to fair value based on changes in the spot exchange rate, and a foreign exchange gain or loss is recognized in net income. 2. The derivative hedging instrument is adjusted to fair value (resulting in an asset or liability reported on the balance sheet), with the counterpart recognized as a gain or loss in net income.
- 7. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-3 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. G. Under fair value hedge accounting for hedges of foreign currency firm commitments: 1. the gain or loss on the hedging instrument is recognized currently in net income, and 2. the change in fair value of the firm commitment is also recognized currently in net income. This accounting treatment requires (1) measuring the fair value of the firm commitment, (2) recognizing the change in fair value in net income, and (3) reporting the firm commitment on the balance sheet as an asset or liability. A decision must be made whether to measure the fair value of the firm commitment through reference to (a) changes in the spot exchange rate or (b) changes in the forward rate. H. Cash flow hedge accounting is allowed for hedges of forecasted foreign currency transactions. For hedge accounting to apply, the forecasted transaction must be probable (likely to occur). The accounting for a hedge of a forecasted transaction differs from the accounting for a hedge of a foreign currency firm commitment in two ways: 1. Unlike the accounting for a firm commitment, there is no recognition of the forecasted transaction or gains and losses on the forecasted transaction. 2. The hedging instrument (forward contract or option) is reported at fair value, but because there is no gain or loss on the forecasted transaction to offset against, changes in the fair value of the hedging instrument are not reported as gains and losses in net income. Instead they are reported in other comprehensive income. On the projected date of the forecasted transaction, the cumulative change in the fair value of the hedging instrument is transferred from other comprehensive income (balance sheet) to net income (income statement). V. IFRS is very similar to U.S. GAAP with respect to the accounting for foreign currency transactions and hedging of foreign exchange risk. A. IAS 21 requires the use of a two-transaction perspective in accounting for foreign currency transactions with unrealized foreign exchange gains and losses accrued in net income in the period of exchange rate change. B. IAS 39 allows hedge accounting for foreign currency hedges of recognized assets and liabilities, firm commitments, and forecasted transactions when documentation requirements and effectiveness tests are met. Hedges are designated as cash flow or fair value hedges. C. One difference between IFRS and U.S. GAAP relates to the type of financial instrument that can be designated as a foreign currency cash flow hedge. Under U.S. GAAP, only derivative financial instruments can be used as a cash flow hedge, whereas IFRS also allows non-derivative financial instruments, such as foreign currency loans, to be designated as hedging instruments in a foreign currency cash flow hedge.
- 8. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-4 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. Answer to Discussion Question Do we have a gain or what? This case demonstrates the differing kinds of information provided through application of current accounting rules for foreign currency transactions and derivative financial instruments. The Ahnuld Corporation could have received $200,000 [$2.00 x 100,000 tchecks] from its export sale to Tcheckia if it had required immediate payment. Instead, Ahnuld allows its customer six months to pay. Given the future exchange rate of $1.70, Ahnuld would have received only $170,000 if it had not entered into the forward contract. This would have resulted in a decrease in cash inflow of $30,000. In accordance with current accounting standards, the decrease in the value of the tcheck receivable is recognized as a foreign exchange loss of $30,000. This loss represents the cost of extending credit to the foreign customer if the tcheck receivable is left unhedged. However, rather than leaving the tcheck receivable unhedged, Ahnuld sells tchecks forward at a price of $180,000. Because the future spot rate turns out to be only $1.70, the forward contract provides a benefit, increasing the amount of cash received from the export sale by $10,000. In accordance with current accounting standards, the change in the fair value of the forward contract (from zero initially to $10,000 at maturity) is recognized as a gain on the forward contract of $10,000. This gain reflects the cash flow benefit from having entered into the forward contract, and is the appropriate basis for evaluating the performance of the foreign exchange risk manager. (Students should be reminded that the forward contract will not always improve cash inflow. For example, if the future spot rate were $1.85, the forward contract would result in $5,000 less cash inflow than if the transaction were left unhedged.) The net impact on income resulting from the fluctuation in the value of the tcheck is a loss of $20,000. Clearly, Ahnuld forgoes $20,000 in cash inflow by allowing the customer time to pay for the purchase, and the net loss reported in income correctly measures this. The $20,000 loss is useful to management in assessing whether the sale to Tcheckia generated an adequate profit margin, but it is not useful in assessing the performance of the foreign exchange risk manager. The net loss must be decomposed into its component parts to fairly evaluate the risk manager’s performance. Gains and losses on forward contracts designated as fair value hedges of foreign currency assets and liabilities are relevant measures for evaluating the performance of foreign exchange risk managers. (The same is not true for cash flow hedges. For this type of hedge, performance should be evaluated by considering the net gain or loss on the forward contract plus or minus the forward contract premium or discount.)
- 9. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-5 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. Answers to Questions 1. Under the two-transaction perspective, an export sale (import purchase) and the subsequent collection (payment) of cash are treated as two separate transactions to be accounted for separately. The idea is that management has made two decisions: (1) to make the export sale (import purchase), and (2) to extend credit in foreign currency to the foreign customer (obtain credit from the foreign supplier). The income effect from each of these decisions should be reported separately. 2. Foreign currency receivables resulting from export sales are revalued at the end of accounting periods using the current spot rate. An increase in the value of a receivable will be offset by reporting a foreign exchange gain in net income, and a decrease will be offset by a foreign exchange loss. Foreign exchange gains and losses are accrued even though they have not yet been realized. 3. Foreign exchange gains and losses are created by two factors: having foreign currency exposures (foreign currency receivables and payables) and changes in exchange rates. Appreciation of the foreign currency will generate foreign exchange gains on receivables and foreign exchange losses on payables. Depreciation of the foreign currency will generate foreign exchange losses on receivables and foreign exchange gains on payables. 4. Hedging is the process of eliminating exposure to foreign exchange risk so as to avoid potential losses from fluctuations in exchange rates. In addition to avoiding possible losses, companies hedge foreign currency transactions and commitments to introduce an element of certainty into the future cash flows resulting from foreign currency activities. Hedging involves establishing a price today at which foreign currency can be sold or purchased at a future date. 5. A party to a foreign currency forward contract is obligated to deliver one currency in exchange for another at a specified future date, whereas the owner of a foreign currency option can choose whether to exercise the option and exchange one currency for another or not. 6. Hedges of foreign currency denominated assets and liabilities are not entered into until a foreign currency transaction (import purchase or export sale) has taken place. Hedges of firm commitments are made when a purchase order is placed or a sales order is received, before a transaction has taken place. Hedges of forecasted transactions are made at the time a future foreign currency purchase or sale can be anticipated, even before an order has been placed or received. 7. Foreign currency options have an advantage over forward contracts in that the holder of the option can choose not to exercise if the future spot rate turns out to be more advantageous. Forward contracts, on the other hand, can lock a company into an unnecessary loss (or a reduced gain). The disadvantage associated with foreign currency options is that a premium must be paid up front even though the option might never be exercised. 8. An enterprise is required to recognize all derivative financial instruments as assets or liabilities on the balance sheet and measure them at fair value. 9. The fair value of a foreign currency forward contract is determined by reference to changes in the forward rate over the life of the contract, discounted to the present value. Three pieces of information are needed to determine the fair value of a forward contract at any point in time during its life: (a) the contracted forward rate when the forward contract is entered into, (b) the
- 10. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-6 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. current forward rate for a contract that matures on the same date as the forward contract entered into, and (c) a discount rate; typically, the company’s incremental borrowing rate. The manner in which the fair value of a foreign currency option is determined depends on whether the option is traded on an exchange or has been acquired in the over the counter market. The fair value of an exchange-traded foreign currency option is its current market price quoted on the exchange. For over the counter options, fair value can be determined by obtaining a price quote from an option dealer (such as a bank). If dealer price quotes are unavailable, the company can estimate the value of an option using the modified Black- Scholes option pricing model. Regardless of who does the calculation, principles similar to those in the Black-Scholes pricing model will be used in determining the value of the option. 10. Hedge accounting is defined as recognition of gains and losses on the hedging instrument in the same period as the recognition of gains and losses on the underlying hedged asset or liability (or firm commitment). 11. For hedge accounting to apply, the forecasted transaction must be probable (likely to occur), the hedge must be highly effective in offsetting fluctuations in the cash flow associated with the foreign currency risk, and the hedging relationship must be properly documented. 12. In both cases, (1) sales revenue (or the cost of the item purchased) is determined using the spot rate at the date of sale (or purchase), and (2) the hedged asset or liability is adjusted to fair value based on changes in the spot exchange rate with a foreign exchange gain or loss recognized in net income. For a cash flow hedge, the derivative hedging instrument is adjusted to fair value (resulting in an asset or liability reported on the balance sheet), with the counterpart recognized as a change in Accumulated Other Comprehensive Income (AOCI). An amount equal to the foreign exchange gain or loss on the hedged asset or liability is then transferred from AOCI to net income; the net effect is to offset any gain or loss on the hedged asset or liability. An additional amount is removed from AOCI and recognized in net income to reflect (a) the current period’s amortization of the original discount or premium on the forward contract (if a forward contract is the hedging instrument) or (b) the change in the time value of the option (if an option is the hedging instrument). For a fair value hedge, the derivative hedging instrument is adjusted to fair value (resulting in an asset or liability reported on the balance sheet), with the counterpart recognized as a gain or loss in net income. The discount or premium on a forward contract is not allocated to net income. The change in the time value of an option is not recognized in net income. 13. For a fair value hedge of a foreign currency asset or liability (1) sales revenue (cost of purchases) is recognized at the spot rate at the date of sale (purchase) and (2) the hedged asset or liability is adjusted to fair value based on changes in the spot exchange rate with a foreign exchange gain or loss recognized in net income. The forward contract is adjusted to fair value based on changes in the forward rate (resulting in an asset or liability reported on the balance sheet), with the counterpart recognized as a gain or loss in net income. The foreign exchange gain (loss) and the forward contract loss (gain) are likely to be of different amounts resulting in a net gain or loss reported in net income. For a fair value hedge of a firm commitment, there is no hedged asset or liability to account for. The forward contract is adjusted to fair value based on changes in the forward rate (resulting in
- 11. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-7 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. an asset or liability reported on the balance sheet), with a gain or loss recognized in net income. The firm commitment is also adjusted to fair value based on changes in the forward rate (resulting in a liability or asset reported on the balance sheet), and a gain or loss on firm commitment is recognized in net income. The firm commitment gain (loss) offsets the forward contract loss (gain) resulting in zero impact on net income. Sales revenue (cost of purchases) is recognized at the spot rate at the date of sale (purchase). The firm commitment account is closed as an adjustment to net income in the period in which the hedged item affects net income. 14. For a cash flow hedge of a foreign currency asset or liability (1) sales revenue (cost of purchases) is recognized at the spot rate at the date of sale (purchase) and (2) the hedged asset or liability is adjusted to fair value based on changes in the spot exchange rate with a foreign exchange gain or loss recognized in net income. The forward contract is adjusted to fair value (resulting in an asset or liability reported on the balance sheet), with the counterpart recognized as a change in Accumulated Other Comprehensive Income (AOCI). An amount equal to the foreign exchange gain or loss on the hedged asset or liability is then transferred from AOCI to net income; the net effect is to offset any gain or loss on the hedged asset or liability. An additional amount is removed from AOCI and recognized in net income to reflect the current period’s allocation of the discount or premium on the forward contract. For a hedge of a forecasted transaction, the forward contract is adjusted to fair value (resulting in an asset or liability reported on the balance sheet), with the counterpart recognized as a change in Accumulated Other Comprehensive Income (AOCI). Because there is no foreign currency asset or liability, there is no transfer from AOCI to net income to offset any gain or loss on the asset or liability. The current period’s allocation of the forward contract discount or premium is recognized in net income with the counterpart reflected in AOCI. Sales revenue (cost of purchases) is recognized at the spot rate at the date of sale (purchase). The amount accumulated in AOCI related to the hedge is closed as an adjustment to net income in the period in which the forecasted transaction was anticipated to occur. 15. In accounting for a fair value hedge, the change in the fair value of the foreign currency option is reported as a gain or loss in net income. In accounting for a cash flow hedge, the change in the entire fair value of the option is first reported in other comprehensive income, and then the change in the time value of the option is reported as an expense in net income. 16. The accounting for a foreign currency borrowing involves keeping track of two foreign currency payables—the note payable and interest payable. As both the face value of the borrowing and accrued interest represent foreign currency liabilities, both are exposed to foreign exchange risk and can give rise to foreign currency gains and losses.
- 12. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-8 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. Answers to Problems 1. C (Foreign exchange gain/loss on foreign currency transaction) An import purchase causes a foreign currency payable to be carried on the books. If the foreign currency depreciates, the dollar value of the foreign currency payable decreases, yielding a foreign exchange gain. 2. D (Method of accounting for foreign currency transactions) Current accounting standards require a two-transaction perspective, accrual approach. 3. B (Foreign exchange gain/loss on foreign currency transaction) Foreign exchange gains related to foreign currency import purchases are treated as a component of income before income taxes. If there is no foreign exchange gain in operating income, then the purchase must have been denominated in U.S. dollars or there was no change in the value of the foreign currency from October 1 to December 1, 2015. 4. C (Calculate foreign exchange gain/loss on foreign currency transaction) The dollar value of the LCU receivable has decreased from $110,000 at December 31, 2015 to $95,000 at February 15, 2016. This decrease of $15,000 should be reported as a foreign exchange loss in 2016. 5. D (Calculate foreign exchange gain/loss on foreign currency borrowing) The increase in the dollar value of the euro note payable represents a foreign exchange loss. In this case a $25,000 loss would have been accrued in 2015 and a $10,000 loss will be reported in 2016. 6. D (Foreign exchange gain/loss on foreign currency transaction) A foreign currency receivable will generate a foreign exchange gain when the foreign currency increases in dollar value. A foreign currency payable will generate a foreign exchange gain when the foreign currency decreases in dollar value. Hence, the correct combination is franc (increase) and peso (decrease).
- 13. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-9 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 7. D (Calculate foreign exchange gain/loss) The merchandise purchase results in a foreign exchange loss of $8,000, the difference between the U.S. dollar equivalent at the date of purchase and at the date of settlement. The increase in the dollar equivalent of the note’s principal results in a foreign exchange loss of $20,000. The total foreign exchange loss is $28,000 ($8,000 + $20,000). 8. D (Forward contract cash flow hedge of foreign currency denominated asset/liability) The Thai baht is selling at a premium (forward rate exceeds spot rate). The exporter will receive more dollars as a result of selling the baht forward than if the baht had been received and converted into dollars on April 1. Thus, the premium results in additional revenue for the exporter. 9. D (Forward contract fair value hedge of foreign currency firm commitment) The parts inventory will be recognized at the spot rate at the date of receipt (FC100,000 x $.23 = $23,000). 10. D (Determine the fair value of a forward contract) The forward contract must be reported on the December 31, 2015 balance sheet as a liability. Barnum has locked-in to purchase ringgits at $0.042 per ringgit but could have locked-in to purchase ringgits at $0.037 per ringgit if it had waited until December 31 to enter into the forward contract. The forward contract must be reported at its fair value discounted for two months at 12%, which is $4,901.50 [($.042 – $.037) x 1,000,000 x .9803]. 11. C (Calculate foreign exchange gain/loss on foreign currency transaction) The 10 million won receivable has changed in dollar value from $35,000 at 12/1/15 to $33,000 at 12/31/15. The won receivable will be written down by $2,000 and a foreign exchange loss will be reported in 2015 income. 12. B (Forward contract fair value hedge of foreign currency denominated asset/liability) The nominal value of the forward contract on December 31, 2015 is a positive $2,000, the difference between the amount to be received from the forward contract actually entered into, $34,000 ($.0034 x 10 million), and the amount that could be received by entering into a forward contract on December 31, 12. (continued)
- 14. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-10 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 2015 that matures on March 31, 2016, $32,000 [$.0032 x 10 million]. The fair value of the forward contract is the present value of $2,000 discounted for three months, which is $1,941.20 [$2,000 x .9706]. On December 31, 2015, MNC Corp. will recognize a $1,941.20 gain on the forward contract and a foreign exchange loss of $2,000 on the won receivable. The net impact on 2015 income is –$58.80. 13. A (Forward contract cash flow hedge of forecasted foreign currency transaction) The krona is selling at a premium in the forward market, causing Pimlico to pay more dollars to acquire kroner than if the kroner were purchased at the spot rate on March 1. Therefore, the premium results in an expense of $10,000 [($.12 – $.10) x 500,000]. The Adjustment to Net Income is the amount accumulated in Accumulated Other Comprehensive Income (AOCI) as a result of recognizing the Premium Expense and the fair value of the forward contract. The journal entries would be as follows: 3/1 no journal entries 6/1 Premium Expense $10,000 AOCI $10,000 AOCI $2,500 Forward Contract $2,500 Foreign Currency $57,500 Forward Contract 2,500 Cash $60,000 AOCI $7,500 Adjustment to Net Income $7,500 14. C (Option cash flow hedge of forecasted foreign currency transaction) This is a cash flow hedge of a forecasted transaction. The original cost of the option is recognized as an Option Expense over the life of the option.
- 15. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-11 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 15-17. (Option fair value hedge of a foreign currency firm commitment) 15. B 16. D The easiest way to solve problems 15 and 16 is to prepare journal entries for the option fair value hedge and the firm commitment. The journal entries are as follows: 9/1/15 Foreign Currency Option $2,000 Cash $2,000 12/31/15 Foreign Currency Option $300 Gain on Foreign Currency Option $300 Loss on Firm Commitment $980.30 Firm Commitment $980.30 [($.79 – $.80) x 100,000 = $1,000 x .9803 = $980.30] Net impact on 2015 net income: Gain on Foreign Currency Option $300.00 Loss on Firm Commitment (980.30) $(680.30) 3/1/16 Foreign Currency Option $700 Gain on Foreign Currency Option $700 Loss on Firm Commitment $2,019.70 Firm Commitment $2,019.70 [($.77 – $.80) x 100,000 = $3,000 – $980.30 = $2,019.70] Foreign Currency (C$) $77,000 Sales $77,000 Cash $80,000 Foreign Currency (C$) $77,000 Foreign Currency Option 3,000 Firm Commitment $3,000 Adjustment to Net Income $3,000
- 16. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-12 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 15-17. (continued) Net impact on 2016 net income: Gain on Foreign Currency Option $ 700.00 Loss on Firm Commitment (2,019.70) Sales 77,000.00 Adjustment to Net Income 3,000.00 $78,680.30 17. B Net cash inflow with option ($80,000 – $2,000) $78,000 Cash inflow without option (at spot rate of $.77) 77,000 Net increase in cash inflow $ 1,000 18-20. (Forward contract fair value hedge of a foreign currency firm commitment) The easiest way to solve problems 18 and 19 is to prepare journal entries for the forward contract fair value hedge of a firm commitment. The journal entries are as follows: 3/1 no journal entries 3/31 Forward Contract $1,250 Gain on Forward Contract $1,250 ($1,250 – $0) Loss on Firm Commitment $1,250 Firm Commitment $1,250 Net impact on first quarter net income is $0.
- 17. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-13 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 18-20. (continued) 4/30 Loss on Forward Contract $250 Forward Contract $250 [Fair value of Forward Contract is (($.120 – $.118) x 500,000) = $1,000; $1,000 – $1,250 = $250] Firm Commitment $250 Gain on Firm Commitment $250 Foreign Currency (pesos) $59,000 Sales [500,000 pesos x $.118] $59,000 Cash [500,000 x $.120] $60,000 Foreign Currency (pesos) $59,000 Forward Contract 1,000 Firm Commitment $1,000 Adjustment to Net Income $1,000 Net impact on second quarter net income is: Sales $59,000 – Loss on Forward Contract $250 + Gain on Firm Commitment $250 + Adjustment to Net Income $1,000 = $60,000. 18. A 19. C 20. B Cash inflow with forward contract [500,000 pesos x $.12] $60,000 Cash inflow without forward contract [500,000 pesos x $.118] 59,000 Net increase in cash flow from forward contract $ 1,000
- 18. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-14 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 21-22. (Option cash flow hedge of a forecasted foreign currency transaction) The easiest way to solve problems 21 and 22 is to prepare journal entries for the option cash flow hedge of a forecasted transaction. The journal entries are as follows: 11/1/15 Foreign Currency Option $1,500 Cash $1,500 12/31/15 Option Expense $400 Foreign Currency Option $400 (The option has no intrinsic value at 12/31/15 so the entire change in fair value is due to a change in time value; $1,500 – $1,100 = $400 decrease in time value. The decrease in time value of the option is recognized as an expense in net income.) Option Expense decreases net income by $400. 2/1/16 Option Expense $1,100 Foreign Currency Option 900 Accumulated Other Comprehensive Income (AOCI) $2,000 (Record expense for the decrease in time value of the option; $1,100 – $0 = $1,100; and write-up option to fair value ($.40 – $.41) x 200,000 = $2,000 – $1,100 = $900.) Foreign Currency (BRL) [200,000 x $.41] $82,000 Cash [200,000 x $.40] $80,000 Foreign Currency Option 2,000 Parts Inventory $82,000 Foreign Currency (BRL) $82,000 Accumulated Other Comprehensive Income (AOCI) $2,000 Adjustment to Net Income $2,000
- 19. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-15 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 21-22. (continued) Net impact on 2016 net income: Option Expense $ (1,100) Cost-of-Goods-Sold (82,000) Adjustment to Net Income 2,000 Decrease in Net Income $ (81,100) 21. B 22. C 23. (10 minutes) (Foreign currency payable -- import purchase) a. The decrease in the dollar value of the LCU payable from November 1 (60,000 x .345 = $20,700) to December 31 (60,000 x .333 = $19,980) is recorded as a $720 foreign exchange gain in 2015. b. The increase in the dollar value of the LCU payable from December 31 ($19,980) to January 15 (60,000 x .359 = $21,540) is recorded as a $1,560 foreign exchange loss in 2016. 24. (10 minutes) (Foreign currency receivable – export sale) a. The ostra receivable decreases in dollar value from (50,000 x $1.05) $52,500 at December 20 to $51,000 (50,000 x $1.02) at December 31, resulting in a foreign exchange loss of $1,500 in 2015. b. The further decrease in dollar value of the ostra receivable from $51,000 at December 31 to $49,000 (50,000 x $.98) at January 10 results in an additional $2,000 foreign exchange loss in 2016. 25. (10 minutes) (Foreign currency receivable – export sale) 9/15 Accounts Receivable (FCU) [100,000 x $.40] $40,000 Sales $40,000 9/30 Accounts Receivable (FCU) $2,000 Foreign Exchange Gain $2,000 [100,000 x ($.42 – $.40)] 10/15 Foreign Exchange Loss $5,000 Accounts Receivable (FCU) [100,000 x ($.37 – $.42)] $5,000 Cash $37,000 Accounts Receivable (FCU) $37,000 26. (10 minutes) (Foreign currency payable -- import purchase)
- 20. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-16 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 12/1/15 Inventory $52,800 Accounts Payable (LCU) [60,000 x $.88] $52,800 12/31/15 Accounts Payable (LCU) [60,000 x ($.82 – $.88)] $3,600 Foreign Exchange Gain $3,600 1/28/16 Foreign Exchange Loss $4,800 Accounts Payable (LCU) [60,000 x ($.90 – $.82)] $4,800 Accounts Payable (LCU) $54,000 Cash $54,000 27. (15 minutes) (Determine U.S. dollar balance for foreign currency transactions) Inventory and Cost of Goods Sold are reported at the spot rate at the date the inventory was purchased. Sales are reported at the spot rate at the date of sale. Accounts Receivable and Accounts Payable are reported at the spot rate at the balance sheet date. Cash is reported at the spot rate when collected and the spot rate when paid. a. Inventory [50,000 pesos x 40% x $.17]..................................................... $3,400 b. COGS [50,000 pesos x 60% x $.17] .......................................................... $5,100 c. Sales [45,000 pesos x $.18]....................................................................... $8,100 d. Accounts Receivable [45,000 – 40,000 = 5,000 pesos x $.21]................ $1,050 e. Accounts Payable [50,000 – 30,000 = 20,000 pesos x $.21] ................... $4,200 f. Cash [(40,000 x $.19) – (30,000 x $.20)].................................................... $1,600
- 21. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-17 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 28. (25 minutes) (Prepare journal entries for foreign currency transactions) 2/1/15 Equipment $17,600 Accounts Payable (L) [40,000 x $.44] $17,600 4/1/15 Accounts Payable (L) $17,600 Foreign Exchange Loss 400 Cash [40,000 x $.45] $18,000 6/1/15 Inventory $14,100 Accounts Payable (L) [30,000 x $.47] $14,100 8/1/15 Accounts Receivable (L) [40,000 x $.48] $19,200 Sales $19,200 Cost-of-Goods Sold $9,870 Inventory [$14,100 x 70%] $9,870 10/1/15 Cash [30,000 x $.49] $14,700 Accounts Receivable (L) [$19,200 x 3/4] $14,400 Foreign Exchange Gain 300 11/1/15 Accounts Payable (L) [$14,100 x 2/3] $9,400 Foreign Exchange Loss [20,000 x ($.50 – $.47)] 600 Cash [20,000 x $.50] $10,000 12/31/15 Foreign Exchange Loss $500 Accounts Payable (L) [10,000 x ($.52 – $.47)] $500 Accounts Receivable (L) [10,000 x ($.52 – $.48)] $400 Foreign Exchange Gain $400 2/1/16 Cash [10,000 x $.54] $5,400 Accounts Receivable (L) [10,000 x $.52] $5,200 Foreign Exchange Gain 200 3/1/16 Accounts Payable (L) [10,000 x $.52] $5,200 Foreign Exchange Loss 300 Cash [10,000 x $.55] $5,500
- 22. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-18 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 29. (20 minutes) (Determine income effect of foreign currency payable – import purchase) a. Benjamin, Inc. has a liability of AL 160,000. On the date that this liability was created (December 1, 2015), the liability had a dollar value of $70,400 (AL 160,000 x $.44). On December 31, 2015, the dollar value has risen to $76,800 (AL 160,000 x $.48). The increase in the dollar value of the liability creates a foreign exchange loss of $6,400 ($76,800 – $70,400) in 2015. By March 1, 2016, when the liability is paid, the dollar value has dropped to $72,000 (AL 160,000 x $.45) creating a foreign exchange gain of $4,800 ($72,000 – $76,800) to be reported in 2016. b. Benjamin, Inc. has a liability of AL 160,000. On the date that this liability was created (September 1, 2015), the liability had a dollar value of $73,600 (AL 160,000 x $.46). On December 1, 2015, when the liability is paid, the dollar value has decreased to $70,400 (AL 160,000 x $.44). The drop in the dollar value of the liability creates a foreign exchange gain of $3,200 ($70,400 – $73,600) in 2015. c. Benjamin, Inc. has a liability of AL 160,000. On the date that this liability was created (September 1, 2015), the liability had a dollar value of $73,600 (AL 160,000 x $.46). On December 31, 2015, the dollar value has risen to $76,800 (AL 160,000 x $.48). The increase in the dollar value of the liability creates a foreign exchange loss of $3,200 ($76,800 – $73,600) in 2015. By March 1, 2016, when the liability is paid, the dollar value has dropped to $72,000 (AL 160,000 x $.45) creating a foreign exchange gain of $4,800 ($72,000 – $76,800) to be reported in 2016.
- 23. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-19 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 30. (30 minutes) (Foreign currency borrowing) a. 9/30/15 Cash $100,000 Note payable (dudek) [1,000,000 x $.10] $100,000 (To record the note and conversion of 1 million dudeks into $ at the spot rate.) 12/31/15 Interest Expense $525 Interest Payable (dudek) $525 [1,000,000 x 2% x 3/12 = 5,000 dudeks x $.105 spot rate] (To accrue interest for the period 9/30 – 12/31/15.) Foreign Exchange Loss $5,000 Note Payable (dudek) [1 m x ($.105 – $.10)] $5,000 (To revalue the note payable at the spot rate of $.105 and record a foreign exchange loss.) 9/30/16 Interest Expense [15,000 dudeks x $.12] $1,800 Interest Payable (dudek) 525 Foreign Exchange Loss [5,000 dudeks x ($.12 – $.105)] 75 Cash [20,000 dudeks x $.12] $2,400 (To record the first annual interest payment, record interest expense for the period 1/1 – 9/30/16, and record a foreign exchange loss on the interest payable accrued at 12/31/15.) 12/31/16 Interest Expense $625 Interest Payable (dudek) [5,000 dudeks x $.125] $625 (To accrue interest for the period 9/30 – 12/31/16.) Foreign Exchange Loss $20,000 Note Payable (dudek) [1 m x ($.125 – $.105)] $20,000 (To revalue the note payable at the spot rate of $.125 and record a foreign exchange loss.)
- 24. Chapter 07 - Foreign Currency Transactions and Hedging Foreign Exchange Risk 7-20 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education. 30. (continued) 9/30/17 Interest Expense [15,000 dudeks x $.15] $2,250 Interest Payable (dudek) 625 Foreign Exchange Loss [5,000 dudeks x ($.15 – $.125)] 125 Cash [20,000 dudeks x $.15] $3,000 (To record the second annual interest payment, record interest expense for the period 1/1 – 9/30/15, and record a foreign exchange loss on the interest payable accrued at 12/31/16.) Note Payable (dudek) $125,000 Foreign Exchange Loss 25,000 Cash [1 m dudeks x $.15] $150,000 (To record payment of the 1 million dudek note.) b. The effective cost of borrowing can be determined by considering the total interest expense and foreign exchange losses related to the loan and comparing this with the amount borrowed: 2015 Interest expense $525 Foreign exchange loss 5,000 Total $5,525 / $100,000 = 5.525% for 3 months 5.525% x 12/3 = 22.1% for 12 months 2016 Interest expense $2,425 Foreign exchange losses 20,075 Total $22,500 / $100,000 = 22.5% for 12 months 2017 Interest expense $2,250 Foreign exchange losses 25,125 Total $27,375 / $100,000 = 27.38% for 9 months 27.38% x 12/9 = 36.5% for 12 months Because of appreciation in the value of the dudek, the effective annual borrowing costs range from 22.1% – 36.5%.
- 25. Exploring the Variety of Random Documents with Different Content
- 26. the fate of Adriano has been partially cleared up by my friend Mr. Rawdon Brown from the Sanuto Diaries, wherein it appears that he safely reached Venice through Calabria, and that the occasion of his unaccountable disappearance was a journey to the conclave on Leo's death, not his flight from Rome in the present year, as stated by Guicciardini, Valeriano, and Roscoe.[276] Thus baffled in the field, and betrayed in the consistory, Leo found a great effort necessary. On the 20th of June he wrote a letter to Henry VIII., which has been published by Rymer, representing, in vague generalities, and abusive terms, the outrages committed against the dignity and temporal dominion of the Church by relentless robbers and adversaries, and enjoining him to contribute assistance, in the way to be orally explained by the bearer, a predicant friar named Nicholas.[277] He also made renewed instances with his other allies for more efficient aid against his contumacious vassal in Umbria, and sent to levy six thousand Swiss. In order to raise money for these new expenses, he, on the 26th of June, created thirty-one cardinals, thus at once filling his treasury with the price of their hats, and surrounding himself by chosen adherents. Nor did he omit still more profligate expedients. He had repeatedly profited by Maldonato's perfidy in the Urbino war, and now offered him 10,000 ducats, with the dignity of cardinal to his son, if he would deliver up Francesco Maria alive or dead.[278] After the affair at Imperiale, the Papal troops keeping close in their garrisons, Francesco Maria had recourse to a partisan warfare of sallies and surprises, which greatly harassed them, but did not give sufficient employment to his own somewhat unmanageable levies. He had now ascertained from intercepted letters the full extent of Maldonato's treason; but, ere he ventured upon making an example, he thought it well to put his troops into good humour by a foraging expedition, which should also free his own state from their burdensome presence. Gian Paolo Baglioni, Lord of Perugia, had, during the whole campaign, been in the field against the Duke with three thousand men, and his relation and rival Carlo, exiled by his
- 27. intrigues from that city, besought Francesco Maria's aid for his re- establishment. No proposal could have been more opportune, and the Duke drew all his forces towards the vale of Tiber. But his army, disorganised by the intrigues of Maldonato and one Suares (not the bearer of his cartel), broke out into tumult at Cantiano, clamouring for pay or pillage, and both of these officers, heading the mutiny, insulted and threatened their general. In this predicament, his adherents quickly collected from the neighbouring villages some money, church plate, and other valuables, which brought the refractory troops into better humour; and the opportune news of considerable booty having been obtained beyond the frontier, by the advanced guard of Gascons, induced them to move upon the Pianello di Perugia. The Spanish troops whom the Duke had brought from Lombardy consisted of two battalions, that of San Marco under Maldonato, and that of Verona under Alverado. The disaffection was confined to a portion of the former, and had for some time been detected through intercepted correspondence of their officers. On the march through the Apennines, Francesco Maria gradually prepared their comrades of Verona for the vengeance he had in store for the traitors. When all was ready, he halted on a small plain, and, whilst the surrounding defiles were being occupied by his staunchest adherents, he formed the Spaniards into a square, with their officers in the middle, whom he thus addressed: "Gentlemen and Captains! You are aware how I entered this country under your protection, and how, in committing myself into your hands, on your promise never in life or in death to abandon me, I relied upon your long-established reputation that you never had betrayed any of your leaders. I now, however, find that some among you seek miserably to sell me, and so for ever stain your honourable name; and this I presently shall prove, if you think fit, with the double object of saving myself from assassination and you from disgrace, but on condition that you shall at once take such steps as you deem best adapted to rescue me from pressing peril, and yourselves from lasting contumely." This harangue, falling upon well tutored ears, was answered by shouts of "Death to the traitors!
- 28. reveal them at once!" Proofs were then read that Maldonato had engaged to slaughter the Duke and Federigo del Bozzolo, for the bribe of a life-pension to himself of 600 ducats, an episcopal see to his son, and double pay during the whole campaign to his troops. There is said to be a standard of honour among thieves; that of the Spaniards was piqued by this melodramatic impeachment of their truth, and the opportune discovery of further treasonable documents in the baggage of Maldonato's mistress exasperated them to fury. That craven captain threw himself at the feet of Francesco Maria, whom he had recently insulted, and prayed for mercy; but the latter withdrew from the square, saying that he left the affair to the soldiery. A cry then arose, "Let the faithful officers come out!" They did so, leaving eight whose names had been denounced, and who were instantly massacred by the troops. Thus was the army saved from destruction by the coolness and decision of its leader, and the companies of San Marco and Verona, purged from the imputation of perfidy, were from that day embodied in a single battalion. Having so happily scotched the vipers that endangered his safety, the Duke of Urbino made his descent upon Perugia. After a short siege, during which he extended his forays as far as Spoleto and Orvieto, spreading alarm to the gates of Rome, that city capitulated on the 26th of May, receiving Carlo Baglioni as its master, and paying a ransom of 10,000 scudi, which Vermiglioli, the biographer of Gian Paolo, alleges the latter, with the bad faith usual in that age, to have shared, although the money had been raised from his own adherents. The same authority now estimates the Duke's army at twelve thousand men, with which it was his intention to make a diversion into the Florentine territory. But hearing that the Legate had taken the field, he hurried back across the Apennines, though too late to save Fossombrone and La Pergola. His wish of engaging the enemy having been foiled by their retreat into Pesaro, he had recourse to his former tactics of removing the seat of war from his own state, and turned his arms against the more wealthy towns of the Marca. Many of these, including Fabriano, Ancona, and Recanati, compounded for exemption from military violence, by paying seven
- 29. or eight thousand ducats each. Corinaldo was saved by a well-timed sally, but Jesi, contrary to the wish of Francesco Maria, was sacked by his Spaniards, to whom his orderly and methodical way of laying the country under contributions, and pillaging only the refractory, was far from acceptable. The lesson he had given to these free lances appears for a time to have borne fruit, and the following report by Minio, of a conversation with the Pontiff, affords honourable testimony to their steadiness, whilst it exhibits very graphically the character of the contest at this juncture. "I afterwards inquired of his Holiness if he had any news? He told me Francesco Maria was encamped under a castle named Corinaldo, situated in the Marca, and that infantry had been detached from his Holiness's army for its defence, so he hoped not to be disappointed; a trust wherein I think the Pontiff will be deceived, as he was regarding the other places. I said to him, 'It is a good sign, his inability to make any further progress, and merely laying siege to a few inconsiderable castles;' and to this his Holiness rejoined, 'He does it to raise money, as he did by the other places.' He then told me that Don Ugo de Moncada had been with the Spaniards, but was unable to make any settlement; adding, with an air of surprise, 'I was willing to give them three arrears of pay, yet they did not choose to come away, but despatched a friar to say that should I undertake an expedition against the infidels, they are willing to accept this offer, and serve.' I answered, that if so, they were willing to fight against the infidels on the same terms for which they now served Francesco Maria against the Holy See! The Pope evinced little hope of an agreement with these Spaniards. On my observing, 'The Viceroy [Don Ugo] has quitted Naples, we know not wherefore, unless it be to come to your Holiness's assistance,' he replied, 'They do say they are coming to aid me;' and then continued, with a smile on his lips, 'See what a mess this is! The French suspect these Spaniards of playing them some trick, and the Spaniards fear lest the French, through Francesco Maria, should attack them in the kingdom of Naples.' In order to elicit something more, I said that I deemed it mere suspicion on either side; and he replied, 'It is so.' I
- 30. next asked how his Holiness stood with the Swiss? and he answered, 'We shall have the Grisons, but the Cantons have not yet decided, though they were to do so in a diet; at all events, I shall have some, and I have sent them the pensions they required of me.'" On the 14th of July, two days after this despatch, Minio reports that Don Ugo had been dismissed by the Spanish troops, drawn up in three fine battalions, with the following reply: "That they did not intend to desert Francesco Maria, unless war were waged [by him] against their most Catholic King, or some attempt made to occupy the kingdom of Naples, or unless his Holiness shall commence hostilities against his most Christian Majesty; in any other event they meant to keep their faith to Francesco Maria, and would in no respect fail him." From various passages in the same envoy's despatches, it is clear that these jealousies, though here ridiculed by Leo, were shared by himself in a high degree: his own policy being generally hollow and Machiavellian, he looked for no longer measure of good faith from his allies. Ever since interest had been made at Bologna by Francis I. in behalf of the Duke of Urbino, the Pontiff regarded him as at heart adverse to all nepotic schemes upon that principality; and, at this particular juncture, suspicion was strengthened by a variety of circumstances, singly of little moment. Among these, were the retention by his Holiness of Modena and Reggio; the apparent slight of passing, in the late wholesale distribution of cardinal's hats, over Ludovico Canossa, who, while legate in France, had gained the King's affections, more perhaps than was approved at the Vatican; the dilatory advance of those French lances long since promised to Lorenzo de' Medici; but most of all the adherence to the della Rovere banner of the Gascons, who owed at least a nominal allegiance to the French crown. Influenced by these doubts, and the apparently interminable expenses of this miserable and mismanaged contest, the Pope so far lost heart, about the end of July, as to hint at an accommodation.
- 31. The Duke of Urbino's next move was to repeat at Fermo his Perugian policy of restoring an exiled faction, by expelling Ludovico Freducci, then head of the government, who after a gallant struggle suffered a complete rout, with the loss of six hundred slain. The Duke then directed his march upon Ascoli, but was recalled by learning the approach of two thousand Swiss to reinforce the papal troops. Hurrying to intercept them, he by forced marches suddenly appeared near Rimini, where he found that, simultaneously with their arrival, M. de l'Escu had at length brought up his three hundred French gens-d'-arms, with instructions from Francis to arrange, if possible, some issue to this unhappy war. Nor was the Legate disinclined to the proposal, for the Pontiff had been playing a ruinous game, which disgusted his allies, alienated his subjects, and drained his treasury. An interview was, therefore, held at the monastery of La Colonella, between the Duke, Cardinal Bibbiena, and the French captain. A guarantee of 10,000 ducats of income in any residence he should select was offered to Francesco Maria, if he would resign his state. But he declared himself ready to die rather than so to sell it and his honour, avowing, however, that if the Pope were resolved to deprive him of his sovereignty on account of the Cardinal's slaughter, he would abdicate in favour of his infant son, and carry his army to Greece, to fight for the recovery of Constantinople. When negotiations had been thus broken off, as described by Giraldi, the smooth-tongued churchman, nothing abashed by the contrast of their early familiarity with their present circumstances, invited him to partake of a splendid collation. This he courteously declined, and retired to breakfast with l'Escu, answering the Cardinal's remonstrances by a jesting but pungent remark, that "priests kill with wine-cups, soldiers with the sword." The Duke making somewhat minute inquiries as to the Swiss reinforcements, the Legate laughingly asked, "if he destined for them such a supper as he provided for the Germans and Spaniards at the Imperiale"; to which he rejoined, "And why not, if they are my foes?"[279] Nor was the taunt lost upon him. Next night he led his men through the
- 32. Marecchia, and surprised the Swiss levies who were quartered in S. Giuliano, a suburb of Rimini beyond that river. Notwithstanding a gallant resistance, they were driven into the stream, with severe loss on both sides, whilst Francesco Maria, after receiving a ball in his cuirass, dexterously withdrew from his perilous position, under cover of the smoke raised by a vast funeral pile, on which he left the bodies of four hundred slain, amid a mass of combustibles. He now resumed his projects of carrying fire and sword into Tuscany, and reached the Upper Vale of the Tiber at Borgo S. Sepolcro, but, for want of artillery, was unable to do anything against the fortified places. The Duke's whole policy in this protracted and inconclusive warfare has been severely blamed by Roscoe, and there can be no doubt that, in his circumstances, rapid and aggressive tactics were most likely to succeed. Had he, by a series of uninterrupted advantages, maintained the impression made at his first onset, or had he risked all in one engagement when his enemies had been daunted by Lorenzo's severe wound, it is clear, from the Minio despatches, that Leo might have been frightened into fair terms, at a moment when treason was rife even within the Sacred College. The like result would, perhaps, have been attained with greater certainty, had he, instead of harassing his own territory and La Marca with an exhausting civil war, carried his arms at once across the Apennines, and, by threatening Siena or Florence, made it a question whether the Medici were to lose Tuscany or gain Urbino. But we shall have ample reason, in other instances, to perceive that procrastination was more natural to him than energy, and, in the present case, delays for a time appeared injurious to his enemies rather than to himself. It is, however, fair to admit that, whilst his biographers continually claim for him anxiety to bring on a decisive action, even the prejudiced Guicciardini never accuses him of having evaded one. A general feeling gained ground that this weary and wasteful strife was approaching its close. The Duke's mercenaries, seeing no prospect of their pay, which was contingent on complete success, and dissatisfied with their limited opportunities for pillage, began to
- 33. look out for some more profitable engagement. Their most Christian and most Catholic majesties had also combined to bring the struggle to a conclusion, by recalling their respective subjects from the army of Francesco Maria; nor did the Spaniards think it a disgrace to entertain tempting offers for their secession from a cheerless enterprise. Three of their captains accordingly went to Rome, on the 6th of August, apparently with his sanction, and offered for 60,000 ducats to place the whole state of Urbino in the hands of these two monarchs, for their award as to which competitor should be preferred. The Pontiff at first made a show of entertaining this proposition, in so far at least as regarded the duchy proper; but this was probably a pretext for gaining time until the arrival of four thousand lansquenets, whom he expected from the Emperor. Accordingly, on the 14th, in an audience with Minio, he denounced these terms as "the most brutal possible, nor could Francesco Maria send to demand of me what he does, were he the Grand Turk, and encamped at Tivoli! He wants us to give him up the places we hold, namely, Pesaro and Sinigaglia: see, by your faith, what notions he has! We really desired this agreement, that we might attend to the Turkish affairs, but these people are indeed elated and brutal." The like opinion prevailed at Rome, and the imperial ambassador deprecated the arrangement to his Holiness as disgraceful. It was therefore rejected after some delay; nor was it until the papal court had taken new alarm, on the Duke's movement into Tuscany, that the Spaniards were bought off by the auditor of the treasury, who had been sent for the purpose to their camp near Anghiari. He was met by the Duke, with his faithful partisan di Bozzolo, and the Spanish captains. After a protracted discussion, the former went forth, moved almost to tears, exclaiming, "It is impossible for me to accept these terms." In his absence it was agreed that the duchy should be given up to Lorenzo, and that the Spaniards should accompany Don Ugo de Moncada towards Naples, after receiving 50,000 ducats, under an obligation to serve in reinstating Lorenzo in Urbino, if called upon to do so.
- 34. On hearing these stipulations, Francesco Maria had an altercation with the Spanish captains, which ended in his riding over to the quarters of his other adherents, who yet remained faithful, and who were with difficulty dissuaded from falling upon the renegades. An idea now entertained, of making a last stand in the highlands with that residue, was soon abandoned, for similar influences were at work on them. But, mindful of their solemn obligation not to quit the field until victory had crowned their enterprise, they resolved to retire with honour intact. The Gascons, accordingly, by the mediation of l'Escu and Guise, obtained from the Pontiff not only an exemption from their engagement, but such a capitulation for the Duke of Urbino as he might, with due regard to his dignity, accept. In order to persuade the latter to such a course as circumstances rendered necessary, the entreaties of his friends were added to the pressing instances of Don Ugo and the French generals. The French and German troops, after receiving 25,000 ducats, were to fall back upon Milan, leaving him safely at Mantua; but the Italian soldiery appear to have shared no part of this golden harvest. The conditions obtained for Francesco Maria were as follows: Plenary absolution for himself, his family, and adherents, from ecclesiastical censures; permission to him and them to retire where they pleased, and to take any service except against his Holiness; leave to remove all his private property in arms, artillery, and furniture, especially his MS. library; the enjoyment of their usufructuary rights to the dowager and reigning Duchesses; a general amnesty and exchange of prisoners, including Sigismondo Varana. This convention was accepted by his Holiness on the 16th of September, and it fell to Bembo's lot, as papal secretary, to affix his signature to what he, perhaps, persuaded himself were favourable terms for his former friend and benefactor. The conduct of the Spaniards was regarded with universal contempt and disgust. As they withdrew towards the Neapolitan territory, a formidable band four or five thousand strong, the men of Gubbio stood on their defence, but those of Fabriano, less alert, were
- 35. surprised and pillaged to the value of 2000 scudi. "But if the wretches sinned at Fabriano, they did penance at Ripatrasone; for, in trying to sack it also, many of them were slain, and the survivors were taken to Gerbe, in Africa, where they nearly all died,—some from drinking too much, some from drinking too little. The former by great good luck were drowned, and the latter, marching through that country in the parching summer heats, with water scarce, and no wine, perished of thirst; so that they had better have followed the Duke to marvellous enterprises and mighty gains, rather than have left to the world a degraded name." There is something quaint in the concentrated rancour wherewith Giraldi thus dismisses these selfish adventurers; and not less so in the following rustic memorial. Grateful for their escape, comparatively scathless, from perils which nearly menaced them, the people of Maciola, a village two miles from Urbino, placed in their church a votive picture to the Madonna, which is still inscribed with these simple verses:— "A horrible war [raged] in the state of Urbino, In fifteen hundred and seventeen, [With] many troops brave and chosen Led by the Duke Lorenzino, When Francesco Maria into his duchy Was returned, with capital troops, Spaniards, Mantuans, and other clans, Each one a paladin in arms; Urbino then, and all the district, Being in great peril and dread. Oh, Virgin Mother! ever kind to us, Often did the host approach our walls, And God alone it was who defended them: Therefore has been dedicated to thee this image by thy worshippers Of Maciola, with their grateful vows." In the war thus concluded, Francesco Maria struggled for eight months, single-handed and penniless, against the temporal and spiritual influence of the Holy See, backed by all the continental
- 36. powers. Unable to carry his object by a coup-de-main, he was in the end vanquished by the superior resources of his oppressor. In a parting address to his subjects, he assumed the tone of victory, asserting that he withdrew, not under compulsion, but from consideration of their interests, which a prolonged struggle must have deeply compromised. Thus retiring with honour, he promised to return to them with glory, when he could do so without detriment to their welfare. He was escorted by l'Escu as far as Cento, whence he rejoined his family at Mantua, presenting his consort with sixty-four standards, taken during this brief and unequal campaign, wherein his talents had been developed, his character strengthened, his fame extended. We have dwelt somewhat minutely—it may be tediously—upon these events, for the contest was one of vital moment to Francesco Maria, his duchy being at once the theatre of operations and the guerdon of victory. Yet this petty war was pregnant with results of wider interest; for the enormous drain of money it occasioned so aggravated the financial difficulties of the papacy, as to bring to a crisis those abuses which finally matured the Reformation. The Minio despatches abound in proofs of the desperate state to which the treasury was reduced, and of the simoniacal expedients resorted to for ready money. One of these may be noted as compromising Bembo, who so often re-appears in these pages. He and Sadoleto had, since Leo's accession, monopolised his private brieves, which afforded them a handsome return, from gratuities and bribes, to the exclusion of the other papal secretaries. Now, however, the latter offered to their needy master a purse of 25,000 ducats, if admitted to share the spoils, which was greedily accepted, without regard to vested interests; and his Holiness was delighted to find the purchase-money of his ordinary secretaryships thereby raised at once from 6000 to 7000 ducats each. The imposition of one tenth laid on the clergy, avowedly for the proposed Turkish crusade, was absorbed by this Urbino campaign, which was thought to have cost the Holy See thirty thousand men, and a million of scudi. Even Henry VIII. was applied to for a loan of 200,000 ducats, which he
- 37. characteristically evaded by offering 100,000, on condition of levying for himself the clergy tenths. But let us take the Pontiff's own statement, volunteered to Minio:—"See, by your troth, what a business this is! The war costs us 700,000 ducats; and we have been so ill served by these ministers, that worse cannot be imagined: this very month we had to disburse 120,000. When we commenced the war we had some few funds, which we had not chosen to touch, but the Lord God has aided us. We should never have thought it possible to raise 100,000 ducats, and we have obtained 700,000; see how astonishing this is! Had we deemed it possible to obtain 700,000 ducats, we would have undertaken the expedition against the Turks single-handed." But where was the minion for whom all this crime and misery had been perpetrated? From Ancona he paid a brief visit to the Vatican, on his way to Florence, where he slowly recovered from his severe wound, only to plunge deeper in debaucheries more congenial to his degraded character than the privations of military life. He was never named during the rest of the contest, but as soon as it was over he met his uncle at Viterbo, where, and in the neighbouring country, the papal court passed most of October in field sports. His hard-won sovereignty seems to have afforded him little satisfaction or interest; but in the following year he became an instrument for the further promotion of his uncle's ambition. His marriage having been negotiated through Cardinal Bibbiena to Madelaine de la Tour, daughter of Jean Count of Boulogne and Auvergne, a relation of the French monarch, the titular Duke of Urbino proceeded to Paris in the spring of 1518, for the double ceremonial of his own nuptials, and the Dauphin's baptism, at which he stood sponsor on the 25th of April, as proxy for the Pontiff. Both these events were celebrated with much festive merriment in the gay capital of France, and the young couple were overwhelmed by splendid dowries and wedding- gifts by the Pope and the Monarch. But their bridal joy was of brief
- 38. duration. The Duchess died in childbed on the 23rd of April following, and was followed to the grave five days after by her husband, who expiated with his life the dissolute vices in which he had continuously indulged. Their child survived to be a scourge of the Huguenots, in the person of Catherine de' Medici, wife of Henry II. of France, mother of Francis II., Charles IX., and Henry III.,—in the last of whom the line of Valois and the descendants of Duke Lorenzo became extinct. Hearing of Lorenzo's desperate state, the Pope despatched Cardinal Giulio de' Medici to maintain at Florence the supremacy of his house. The titular dukedom of Urbino passed, in terms of the new investiture, to the infant Catherine; but the territory was unceremoniously seized by his Holiness, notwithstanding the wish of its inhabitants for restoration of their legitimate sovereign. Montefeltro, with S. Leo and Maiuolo, was assigned to Florence, in security or compensation for 150,000 scudi said to have been advanced in the late war, and the remainder of the duchy was annexed to the Church. The walls of its capital, whose loyalty to its native princes amid all their reverses is finely commemorated in the current appellation of Urbino fidelissimo, were thrown down, and its metropolitan privileges transferred to Gubbio, which had shown itself less devoted to the della Rovere interests. We may here mention the fate of Gian Paolo Baglioni, known to us, in 1502, as one of the confederates of La Magione, who, in the quaint words of an unpublished chronicle, escaped the violin-string of Michelotto at Sinigaglia "to fall into the pit which he had digged." We have more lately seen him, in 1517, buying off Francesco Maria from the city of Perugia, with a bribe shared by himself, and have at the same time alluded to the broils there raging between various members of his family. These it would be beyond our purpose to follow; but they were attended by a series of bad faith on his part,
- 39. and of suffering on that of the people, which gained for him the merited title of tyrant of Perugia. Less, perhaps, with the intention of vindicating the latter, than of liberating himself from a talented and unscrupulous vassal, who, long accustomed to rule supreme in that city, ill brooked and scarcely yielded that obedience to the Holy See which Julius II. had imposed on him in 1506, Leo summoned Gian Paolo to Rome in 1520, with amicable professions. There he arrived on the 16th of March, and next day sought an audience of the Pontiff in S. Angelo, the gates of which were immediately closed upon him as a state prisoner. After he had lingered for some months in mysterious durance, unconscious of the charge brought against him, a plan was formed to liberate him, disguised as a woman who visited the castellan; but at that juncture the Pope, who, according to the gossip of a contemporary diarist, had dreamt at La Magliana of a mouse escaping from a trap, sent a summary order for his execution, which took place secretly on the 11th of June. The singular good fortune which accumulated coronets and crowns on the brows of Charles V., until he found himself sovereign by inheritance of a large portion of Europe, here demands our notice. The Emperor Maximilian had, by Mary, daughter and heiress of Charles the Bold, Duke of Burgundy, a son Philip, who predeceased him in 1506, after marrying Joanna, daughter and heiress of Ferdinand and Isabella of Aragon and Castile. Joanna being disqualified by mental imbecility, the united crowns of Spain devolved, on the death of Ferdinand in 1516, to her son Charles, who already held the Netherlands through his grandmother, Mary of Burgundy. As representative of the house of Aragon, he was also sovereign of Naples and Sicily; but the former crown required the papal investiture, which Leo was loath to bestow, partly with a vague hope of reserving it for one of his own race, partly from aversion to the establishment of a new line of foreign rulers in the Italian peninsula. On the death of Maximilian in January 1519, without having formerly received the imperial crown, his grandson, Charles, stepped into Austria, as his natural heritage, and sought still further aggrandisement by offering himself candidate for the throne of
- 40. Germany. Little as the balance of power was then comprehended in European policy, this young monarch's rapid acquisitions called forth many jealousies. Francis had a double motive for standing forward as a competitor for the empire;—the dignity was flattering to his gallant character and ambitious views, and he grudged it to a younger rival, whose overgrown territory already hemmed him in on every side. Leo, at heart disliking them equally, as ultramontane sovereigns formidable to Italy, on the ruins of whose freedom were based the successes of either, sought to play them off against each other, so as to weaken and embarrass both. But in spite of these intrigues, Charles was elected emperor on the 28th of June, 1519, when but nineteen years of age. The Pope had covertly supported the claims of Francis, with whom he intended some ulterior combination for expelling the Spaniards from Lower Italy. But the accession of strength which their sovereign thus acquired gave Leo an excuse for changing sides, an evolution grateful to his faithless nature. The struggle was once more to be made in Lombardy, and, as Charles was bent upon wresting the Milanese from his rival, the opportunity seemed tempting of recovering Parma and Piacenza for the Church by his means. To men in the Duke of Urbino's desperate position, any convulsion would be welcome, as offering the chance of better things. The impression left by his biographers, that he maintained a cautious neutrality in the contest thus opening, is disproved by some documents in the Bibliothèque du Roi, which establish him as a retained adherent of the French monarch.[280] One of them is an undated draft of articles proposed by him, his nephew Sigismondo Varana, Camillo Orsini, the Baglioni, and the Petrucci, as conditions of their entering the service of Francis, with the usual pay and allowances. They stipulated for his constant protection and support in the recovery of their respective states, and for the restoration of various allodial fiefs claimed by them in Naples, as soon as Francis should, with their aid, regain that kingdom. Francesco Maria, finding it necessary to quit the territory of his brother-in-law Federigo, now Duke of Mantua, who had been named captain-general of the ecclesiastical forces, and to surrender
- 41. the allowance of 3000 scudi, hitherto made by him for the Duchess's maintenance, asked a pension of equal amount from his new ally, together with 1500 scudi in hand, to meet the expense of removing his family to a place of security, probably Goito. He accompanied these overtures with a plan for very extended operations upon Central Italy, whereby, with the assistance of Venice and Genoa, armaments by sea and land were to be directed in overwhelming force, at once against Tuscany and the Papal States. The result of this negotiation does not appear, but the only one of its provisions which seems to have taken effect was the Duke's pension, for which he writes thanks to the French Monarch from the camp of Lautrec on the Taro, the 27th of September, 1521. Giraldi mentions that he suddenly quitted the French service in consequence of a slight from Lautrec at a council of war, and he appears then to have retired to Lonno on the Lago di Guarda. From that lovely spot he watched the course of events, until the wheel of fortune should bring round his turn. The ladies of his family meanwhile lived in great seclusion at Mantua, and on the 19th of July, 1521, the dowager Duchess writes him, that she and his consort frequented the convents, soliciting from the nuns their prayers that God would direct his counsels, and vouchsafe the fulfilment of his wishes.[281] As the strife approached, these distinguished ladies withdrew to Verona. Upon its progress we need not dwell. By his oppressive sway Lautrec had rendered the French name odious at Milan, and when the confederate army approached its walls, bringing with them Francesco Sforza, second son of Ludovico il Moro, and brother of Maximiliano their last native sovereign, the people hailed them as liberators, and expelled their foreign masters.
- 42. N CHAPTER XXXVII Death of Leo X.—Restoration of Francesco Maria—He enters the Venetian service—Louis XII. invades the Milanese—Death of Bayard—The Duke’s honourable reception at Venice—Battle of Pavia. EWS of the evacuation of Milan by the French reached Leo X. at his hunting-seat of La Magliana, five miles down the Tiber from Rome. Though not quite well, he hurried to his capital on the 24th of November, to witness the bonfires and rejoicings at their discomfiture, and on the morning of the 1st of December was found dead in bed.[*282] The mystery attending this sudden death of one in the prime of life has never been cleared up. Suspicions of poison were rife at the time, and have not been removed; they point at the Duke of Urbino or of Ferrara, whom he had grievously outraged, or at Francis I., whom he recently disgusted, as its probable but undetected author. In absence of tangible accusation or tittle of evidence, it seems needless to repel such a charge from Francesco Maria, especially as other accounts impute the Pontiff's dissolution to malaria fever, to a severe catarrh,[283] to debauchery, or even to excessive exultation at the joyful news. So unexpected was the event that there was not time to administer the last sacrament, a circumstance which gave occasion to this bitter epigram, in allusion to the notorious venality of church privileges during his reign:— "Why were not Leo's latest hours consoled By holy rites? such rites he long had sold."[284] Tidings so momentous to Francesco Maria reached him when on a visit to the Benedictine monastery at Magusano, on the Lago di Garda. He had audience on the same day with Lautrec and Gritti, the
- 43. French and Venetian commanders, who bade him God-speed. Hurrying to his consort at Verona, he there spent two days in consulting with such friends as were at hand, and despatching courtiers to others, his resolution being taken to strike a speedy blow for recovery of his state. The impoverished finances of the papacy encouraged the attempt, and he was quickly in communication with Malatesta and Orazio Baglioni, who had been in like manner despoiled of Perugia. But before assuming offensive operations, he commissioned a special envoy to lay before the conclave a statement of his grievances, and a justification of the measures he was about to pursue.[285] In two days more he reached Ferrara, with the Baglioni, at the head of three thousand foot and above five hundred horse. On the 16th he was at Lugo, where, and all along his route by Cesena, numerous reinforcements poured in. "His subjects," to borrow the words of Muratori, "desired and expected him with clasped hands, because they loved him beyond measure for his gracious government." Anticipating a renewal of his "Saturnian reign," they, on his approach, flew to arms, threw the lieutenant of Urbino out of the palace window, and welcomed him with the well-known cry of "Feltro! Feltro! the Duke! the Duke!" Pesaro received him on the 22nd, after a slight hesitation as to their relations with the Church; but the citadel was held by eighty men, there being no artillery at hand to bring against it. In absence of cannon-balls, it was carried by paper pellets thrown in from cross- bows, on which were written offers of a thousand scudi to the castellan, and twenty-five to each soldier. The terms were accepted, and the money advanced by Alfonso of Ferrara. On the day of the Duke's arrival there, a deputation from Urbino laid its homage at his feet, and, being thus secure of his own subjects, he turned to succour his friends. Taught by the lesson of three successive pontificates, whose policy it had been to crush the feudatories of Umbria, he saw the necessity of making common cause with such of these as still maintained a precarious independence. He therefore undertook the re-establishment of his nephew, Sigismondo Varana,
- 44. and of the Baglioni, ere he devoted himself to the consolidation of his own authority. After two days' repose in Pesaro, he marched by La Pergola to Fabriano, where, hearing that Sigismondo had been cordially received at Camerino, he, on the 28th, turned towards Perugia, and, by the 5th of January, had reinstated the Baglioni, notwithstanding a spiritless resistance by their uncle Gentile, and by the vacillating Vitelli. Contrary to his own judgment,—but, as we shall presently see, by a happy chance,—he was induced to accompany his Perugian allies with seven thousand men in a foray upon Tuscany, for the double purpose of annoying the Medici, by whom Gentile was supported, and of re-establishing Pandolfo Petrucci as tyrant of Siena.[*286] When, however, he found no responding movement from within, and that the army of Giovanni delle Bande Nere was hovering in the neighbourhood, he withdrew to Bonconvento, and endeavoured to gain credit for his forbearance by despatching to the magistracy of that city the following oily missive:— "Most illustrious and most excellent Lords, much honoured Fathers: "The true, ancient, and cordial friendship which has ever existed between your lofty republic and my most illustrious house, and the recollection I retain how invariably my distinguished predecessors have been united in special good-will with your city of Siena, induce me, being of the same sentiments, to follow in the steps of my said most eminent ancestors, resolving that there shall never be any failure on my part towards your noble commonwealth. And in order that your Excellencies may at present have some proof of this, I have, for the peace and order of your town, adopted the resolution which your envoys will comprehend from the tenor hereof, and which I feel assured cannot be otherwise than welcome and acceptable to you. I therefore pray you not only readily
- 45. to give the like credence to what these envoys will tell you on my part, as you would to myself, but also to bear in mind the close and affectionate amity wherein I am most ready to persevere, nor on your side restrain or fall short of our wonted and long- established kindliness, increasing, and, if possible, extending it by an ampler interchange of charity; for you will assuredly ever find me prepared and ready to benefit and uphold your republic as much as your Excellencies could ever desire, to whom I offer and commend myself. From Bonconvento, the 15th of January, 1522. "Franciscus Maria Dux Urbini."[287] In truth, the Duke's own affairs required his full attention, for the power of the Medici, though shaken, was still formidable, and its natural representative, the Cardinal Giulio, was influential in the Sacred College, and almost sovereign at Florence. Francesco Maria therefore observed a prudent neutrality, when the Bande Nere advanced to support the claims of Gentile Baglioni upon Perugia. These, being warned off the ecclesiastical territory by the consistory, turned up the valley of the Tiber, and, passing the Apennines, made a descent upon Montefeltro, where they plundered until the end of February,—an outrage for which the Cardinal was greatly blamed, as a convention had already been signed between him and the Duke for their respective states of Florence and Urbino. Much light is thrown upon these very complicated transactions by a careful examination of Castiglione's letters. To his dexterous diplomacy that convention seems to have been chiefly owing. He endeavoured to clench the reconciliation by an engagement for Francesco Maria in the Florentine service, and a marriage between Prince Guidobaldo of Urbino and Caterina de' Medici, daughter of Lorenzo, and heiress of his pretensions. The failure of this plan, from backwardness on the part of the Cardinal rather than of the Duke, was, perhaps, fortunate for the intended bridegroom's domestic peace; and the contending
- 46. claims which it was meant to solve never ripened into importance. The condotta had a better issue: avowedly for but one year, it seems to have been intended rather to neutralise a troublesome foe than with the idea of calling the Duke's service into actual requisition. Indeed, although he was nominally captain-general, with 9000 ducats of pay, besides 100 broad scudi for each of his two hundred men-at-arms in white uniform (three mounted soldiers counting as one man-at-arms), this was expressly their peace establishment and pay, to be increased in case of war.[288] Castiglione's success in these arrangements was facilitated by his having confided to Cardinal Giulio a refusal at this time, by Francesco Maria, of very flattering proposals from the French court, and the same good offices extended to disabusing the Duke in the eyes of Emanuel, the imperial ambassador, who, believing him committed to Francis, was countermining his interests in the consistory, and with the Cardinal. Whilst immersed in these transactions, the election in which he was so deeply interested came suddenly to a conclusion, brought about indirectly by his means. The choice of the conclave astonished Italy, for it fell upon an ultramontane cardinal, unknowing and unknown in Rome. Adrian Florent,[*289] a Fleming of humble birth, was a man of mild temper, peaceful habits, and literary tastes. He had been preceptor of Charles V., and held the see of Tortosa. This selection so curiously illustrates the haphazard results, which have not unfrequently baffled both policy and intrigue in papal elections, that we may pause for a moment on the circumstances alleged by Guicciardini to have brought it about. The Medicean party had not strength, at once, to carry their Cardinal, in the face of the old members of the College, who were adverse from introducing the hereditary principle into their selection, yet hoped in time to exhaust the patience or the strength of their seniors. But whilst Medici and Petrucci were thus ingeniously devising delays, news reached them of the Duke of Urbino's descent upon Tuscany, causing them respectively to tremble for their supremacy in Florence and Siena, and to question the policy of procrastinating at the Quirinal, whilst interests so momentous were elsewhere in peril. In this state of
- 47. matters the Cardinal of Tortosa "was proposed, without any intention of choosing him, but that the morning might be wasted; whereupon his eminence of San Sisto, in an endless oration, enlarged upon his virtues and learning, until some of the members beginning to accede, the others successively followed with more impetuosity than deliberation, whereby he was unanimously then chosen Pope. The very electors could allege no reason why, at a crisis of such convulsions and perils for the papacy, they had selected a barbarian pontiff, so long absent, and recommended neither by previous deserts, nor by intimacy with any of the conclave, to whom he was scarcely known by name, having never visited Italy, nor had he any wish or hope to do so."[290] The Roman populace resented a choice which they felt as an insult, and as the cardinals emerged from durance, they were assailed by execrations of the mob.[*291] Francesco Maria had every reason to be gratified by an election he had most unwittingly influenced, for the exclusion of Cardinal Giulio was of vast importance to his interests, which must have been seriously compromised by the nomination of a hostile pontiff, at a moment when his affairs were in so precarious a juncture. He accordingly lost no time in accrediting to Adrian VI. in Spain, an envoy who pleaded his cause to such good purpose, that a bull was issued on the 18th of May, reinstating him in all his honours, including the prefecture of Rome, which, on the death of Lorenzo, had been conferred upon Giovanni Maria Varana, uncle of Sigismondo, whose state he had usurped under the sanction of Leo. Meanwhile his respectful and judicious demeanour had obtained from the Sacred College, before the Pope's arrival, an acknowledgment of his rights, upon the following conditions, dated at Rome, the 18th of February. "The Lord Duke of Urbino promises to accept neither pay, engagement, nor rank from any prince or power, and to take service only with the Apostolic See, should he be required; but if not called upon by it, to attach himself to no party without leave and sanction from the Pope, and the Holy See, as represented ad interim by the Sacred College. Also, he renews his obligation in future never to oppose the papal state; and further, for
- 48. due observance of these terms, and more ample assurance of his Holiness and the Apostolic See, he binds himself within one month to deposit his only son as a hostage, in the hands of the Marquis of Mantua, captain-general of the ecclesiastical troops. On the other hand, the Sacred College undertakes to defend and protect the Lord Duke's person, as well as to maintain him in peaceful possession of the castles, fortresses, cities, and towns, held by him now or before his deprivation; and further, to use influence with our Lord the Pope for his reinvestment in the same, on the terms of his former tenure." [292] Nor was it only from the Medicean faction that the Duke's tranquillity was threatened. Whilst his fortunes were yet in suspense, he was warned by Castiglione, then diplomatic resident at Rome for his brother-in-law the Duke of Mantua, that Ascanio Colonna was agitating certain vague pretensions on the duchy of Urbino, through his mother Agnesina di Montefeltro. The nature of these claims, which were from time to time revived, is not very intelligible. All authorities make Giovanna, wife of the Prefect, older than Agnesina, wife of Fabrizio Colonna, both being daughters of Duke Federigo. Thus, even supposing Francesco Maria's title irretrievably annulled, by the deprivations he had successively sustained from Julius II. and Leo X., if the old investitures did confer any rights upon females, his nephew Sigismondo Varana, grandson of Giovanna, would have excluded the Colonna. Ascanio's intrigues were, however, neutralised by the dexterity of Castiglione, and the influence of the Duke of Mantua, until Francesco Maria's cordial reconciliation with the Church and the Emperor had rendered his position secure.[293] Even the Medici thereupon refused to promote the pretender's views, and his only adherent was Gian Maria Varana, who, having within a few weeks succeeded in recovering possession of Camerino, sought so to occupy the Duke of Urbino as to prevent his espousing the cause of Sigismondo, its rightful lord. The latter also looked for support to his wife's uncle, Cardinal Prospero Colonna, whilst the interests of his competitor were backed by Cardinal Innocenzo Cibò, his brother-in- law. But ere these respective claims could be tested, they were sadly
- 49. set at rest by the death of "poor dear but ill-starred Sigismondo," as he is called by Castiglione, who was set upon and slain on the 24th of June by a band of assassins, whilst riding with five attendants near La Storta. This foul deed, in accordance with the wild habits of that age, and the fratricidal tendencies of the Varana family, was imputed to Ascanio Colonna at the instigation of Giovanni Maria, uncle of the victim. When reassured of pacific and equitable measures, Francesco Maria dissolved a defensive league for mutual maintenance, which he had formed on the 4th of March with the Baglioni, Sigismondo, and the Orsini, to which the Cardinal de' Medici was a party. The strongholds of S. Leo and Maiuolo, however, remained till 1527 in the hands of the Florentines, mortgaged for their advances to Leo in the late war. During these complex negotiations, an offer from Lautrec of service under the lilies of France was declined by the Duke, on a plea of reserving himself for the disposal of his ecclesiastical overlord. Nor was the opportunity he looked for long delayed. Pandolfo Malatesta, on ceding to Venice his pretensions upon Rimini, after being expelled therefrom by Duke Valentino, had accepted from that republic the castle of Cittadella near Padua, with large pay in their service. His son Sigismondo availed himself of the Pope's absence, and the unsettled ecclesiastical policy, to surprise Rimini and its fortress towards the end of May. The consistory hastily mustered all their means to meet the emergency, and called upon the Duke of Urbino as their vassal to take the field. His answer was that without money he could do nothing. About the beginning of August the rocca was retaken by Giovanni Gonzaga for the Church; but the place was not finally recovered till Adrian sent thither some Spanish troops, when the people at length rose, and drove out the interloper, whose cruelties had alienated all his supporters. In this paltry fray the Duke appears to have lent some trifling aid, which the Pontiff gratefully acknowledged in writing to Leonora on the 24th of December. When it was over, he turned to the internal affairs of his duchy, disorganised by the long and severe struggle of which it had been
- 50. the scene. In the spring of 1523 he brought home the ladies of his family "Into their wished haven"; but of their once lively court we have little to record. Much had occurred to chasten the naturally staid temperament of Duchess Leonora. Retrenchment was imperatively imposed by accumulated debts and dilapidated finances: the brilliant assemblage which had frequented the saloons of Urbino seventeen years before was thinned by death, scattered by dire events, alienated by ingratitude, or seduced by newer attractions. It was at this time that Pesaro seems to have become the permanent residence of the ducal establishment, although the original capital was frequently visited by its successive princes. Sanuto's Diaries afford us glimpses of life at that court, in detailing the journey to Rome of four Venetian envoys in March of this year. They arrived on Good Friday, half dead of fatigue, fear, and hunger, having ridden one hundred and twelve miles in two days, through wretched weather and a plague-stricken country. The two Duchesses of Urbino immediately sent them a pressing invitation to transfer their quarters from the inn to better lodgings. This was about sunset, and twilight had scarcely set in when both these ladies arrived in a fine gilt coach, lined with white cloth and trimmings of black velvet, drawn by four beautiful black and grey horses. They were suffering from fever, the younger Duchess having risen from bed expressly to visit the envoys, and apologise for a reception which, but for so unlooked-for an arrival, would have been more conformable to their wishes. Yet the apartment was tapestried from roof to floor, the beds with gold brocade coverlets, and the curtains very handsome. Next morning, after breakfast, the guests went to the palace to wait upon the Duchesses, who met them in the fourth ante-room, whence, after sundry ceremonies, they handed the ladies and their attendants into the presence-chamber, newly done up with arrases, gilding, and a daïs of silk. After conversing in an under-tone for three-quarters of an hour, they retired with the like formalities.
- 51. On Easter Sunday, after vespers, they had an audience of leave, when the younger Duchess, being very seriously indisposed, received them familiarly in a bed-chamber so small that they could not all enter it, renewing many excuses for their indifferent entertainment, in consequence of the religious observances, and the recent arrival of the household at Pesaro. On their return from congratulating the new Pontiff, the envoys passed by Gubbio, where the Duchesses again surprised them by a visit ere breakfast was over, attended by several lovely maidens. The engagement which Francesco Maria had accepted, to command the Florentine armies for a year, did not call him from this retirement; it was important only as indicating an apparent reconciliation with the Cardinal de' Medici, to which the latter was induced by apprehension that he might have otherwise proved a formidable opponent to his interest in a future conclave. After a somewhat serious illness, the Duke repaired to Rome, to offer his homage on the arrival of Adrian in Italy, and was honourably received and formally invested with his restored dignities. He rode there escorted by two hundred lances, and was lodged by the Venetian ambassador in the palace of S. Marco. His late eventful history rendered him an object of general interest, and he was universally admitted to have borne his reverses with firmness, his successes with moderation. To commemorate these, he adopted this device, invented for him by Giovio,—a palm-tree, whose crest was weighed downwards by a block of marble, with the motto, "Though depressed, it recoils." This emblem of valour and constancy, which adversity could bend but could not break, he bore upon his banner and trumpets, and frequently introduced it in his coinage. The repose of Italy was, as usual, of brief duration. Wearied of those contests in which the ambition of France had for thirty years involved the Peninsula, the leading powers began to regard Francesco Sforza's maintenance in the duchy of Milan as their best guarantee of peace. This policy was warmly adopted by the Emperor, interested alike in the welfare of the Neapolitan territory, and in
- 52. humbling his rival Francis I. The result was a new confederation, to which the Pope, the Emperor, Henry VIII., Venice, Milan, and Florence were parties, but which brought on a general war, the very evil it was intended to avert. Francesco Maria's condotta with the Florentines being expired, he was named to succeed Teodoro Trivulzio, whose supposed French tendencies occasioned his removal from command of the Venetian troops. Those of the Church were committed to the Marquis of Mantua, and Prospero Colonna was general-in-chief of the League Lautrec and l'Escu[294] having been recalled, the Admiral Gouffier de Bonnivet was sent into Lombardy to make good the title of his master to the Milanese, whose daring spirit looked not beyond the glory of encountering single-handed the armies of Europe. This struggle, eventually so ruinous to Italy, so fatal to Rome, had scarcely commenced ere Adrian was called from events which he was in no respect fitted to direct. He died on the 24th of September, 1523,[*295] and was succeeded on the 19th of November by the Cardinal de' Medici, as Clement VII., whose first act was an adherence to the League. Prospero Colonna did not long survive the Pontiff. From him, perhaps, Francesco Maria adopted the over-cautious policy which marked his military manœuvres during the remainder of his life, and which contrasts strongly with the dashing valour of his early career. For this he has been severely blamed by Sismondi, and we shall see it attended with very miserable results. Fortunately for the Duke's fame, his reputation in arms had been firmly established before the later and more important years of his military prowess arrived. Ere the allies had completed their preparations, the French poured into Lombardy, carried Lodi, and laid siege to Cremona. The Venetian troops occupied the banks of the Oglio, where they were joined by the Duke of Urbino, as soon as he had received credentials and instructions from the senate; his own stipulated contingent, under his lieutenant-general Landriano, having already effected a junction. Machiavelli, ever prone to cast reflections on mercenary troops, has remarked that the Republic lost her superiority from the time that
- 53. she extensively employed them. This, however, is but a partial view of the case. By their means, backed by their maritime supremacy, and by her matchless diplomatic system, she gradually extended her mainland territory, in spite of the unmilitary genius of her people, until jealousy combined nearly all Europe against her in the League of Cambray. But there was another fault inherent in the organisation of her armies. Dark suspicion was the permeating principle of her policy. Each branch of the executive jealously watched the others. Magistrates distrusted their colleagues; fathers set spies upon their sons, husbands upon their wives; governors and governed doubted their paid troops, or countermined their selected generals. The senate accordingly sent with their stipendiary forces commissioners instructed to watch, and empowered to control, the leaders—a check necessarily inducing dissension, for, as Macaulay has happily remarked, what army commanded by a debating club ever escaped discomfiture and disgrace? Under the title of proveditori, these official spies performed some of the duties belonging to commissaries-general; and although this plan for controlling soldiers of fortune, who owed little fidelity to the cause, and whose ruling principle was usually self-interest, might seem the result of wise precaution, it practically occasioned perpetual embarrassments, and fomented personal quarrels, paralysing operations in the field. Such an imperium in imperio had in this instance its usual results. Distracted councils and divided responsibility hampered free action, and rendered abortive the best-laid plans.[*296] Throughout the long war now opening, the system was pregnant with peculiar mischief, and it ought to bear much of the blame of that dilatory inefficiency which is charged against Francesco Maria. Thus the Proveditore Emo, at the very outset of this campaign, prevented him from crossing the Oglio to harass the retreat of Renzo da Ceri, who, after loitering away two months before Cremona, was recalled to the siege of Milan. The Duke, however, soon after advanced to the Adda, and during the rigour of winter occupied his troops in fortifying themselves at Martinengo, from whence they were enabled to annoy the enemy by continual forays towards Lodi.[297]
- 54. The command vacated by the death of Prospero Colonna was conferred upon Don Carlos de Lanoy, Viceroy of Naples, who arrived at head-quarters in the spring, and, upon drawing together the confederates from their winter quarters, found himself at the head of about twenty thousand foot, and four thousand lances and light cavalry. Among their leaders were the Constable de Bourbon, the Prince of Orange, and Don Ugo de Moncada, with all of whom we shall often meet during the next few years. In the confederate army there were too many conflicting interests, too many rival leaders; but it was the peculiar misfortune of the Duke of Urbino to serve a power whose jealousy exceeded all rational bounds. It was not without considerable persuasion that he obtained of the Signory sanction to cross the Adda, and unite their troops, amounting to twelve hundred horse and six thousand foot, with the forces of the League. The first combined operation was directed against Gherlasco, which Francesco Maria, though in command of the rear-guard, was permitted to carry by assault with his own division, being greatly aided by using explosive shells. From thence they advanced to Vercelli, taking Trumello, Sartirana, and other places by the way. This movement was intended at once to cut off supplies from the French army posted at Novara, and to intercept a strong body of Swiss, for whom they were anxiously waiting. The allies having reached Vercelli, it became a race which army should first gain the bridge of Romagnano, to the west whereof lay the Swiss subsidy. The French had almost passed, when Lanoy fell upon their rear, which suffered immensely in men, baggage, and artillery; and their commander, Bonnivet, was wounded. The credit of all these arrangements is claimed by Leone for the Duke of Urbino, whose annoyance may be imagined when he found himself arrested from reaping the full benefit of their success, by interference of Pietro da Pesaro, the Proveditore. That officer, standing upon the engagement of the Venetian contingent to serve only within the confines of the Milanese, objected to their passing the Sesia, which here formed its limit, and thus nullified the resolution of the confederates to follow up their partial victory by such a well-timed
- 55. attack as might drive the enemy across the Alps. The indignant army appealed to Francesco Maria to break through this official obstruction, but the commissioner was right to the letter, and the stern Signory sanctioned no latitude of construction on the part of its servants. The Duke, however, gained his consent by private remonstrances, at once temperate and energetic, but especially by threatening to throw up his commission from the senate, and as a free captain to pass with his own company into the allies' service, leaving the Proveditore, with a disorganised contingent, to bear the whole responsibility of losing so admirable an opportunity of cutting short a struggle, which it was in every view the interest of his republic to close.[298] The conduct of the French troops devolved, in consequence of the Admiral's wound, upon Piere de Terrail, Chevalier de Bayard, who was not long spared in a command which the blunders of his predecessor had rendered hopeless. On the 30th of April, whilst drawing off the rear-guard under the enemy's fire, a shot fractured his spine. Refusing to be carried from the spot, he had himself supported against a tree, with his face to the foe, and continued to give his orders with composure: at length, feeling the hand of death upon him, he confessed himself to his faithful squire, kissing the hand-guard of his sword as a substitute for the cross. The imperialists remaining masters of the field, he was approached by the Constable Bourbon, to whose words of sympathy and regret he sternly replied, "Grieve not for me, but for yourself, fighting against your king and country." His fall was reported to Charles V. by the imperial envoy, Adrian de Croy, in these touching terms:—"Sire, although the said M. Bayard was in the service of your enemy, his death is certainly a pity; for he was a gentle knight beloved of all, whose life had been as well spent as ever was that of any of his condition, as, indeed, he fully testified at its close, which was the most beautiful I ever heard tell of." Thus fell, in his forty-ninth year, the flower of French chivalry, "the fearless and irreproachable knight." His army evacuated Italy before the end of May, and the Duke of Urbino being entrusted with the recovery of Lodi, found it
- 56. defended by his relation and attached comrade-in-arms, Count Francesco del Bozzolo, who, perceiving his position hopeless, soon capitulated upon honourable terms. After the ample details we had given of the comparatively unimportant Urbino war, our rapid glance at the events in Upper Italy, from 1521 to 1526, may seem superficial. But as these Lombard campaigns, although momentous to Europe, told very slightly upon the general policy of the Peninsula, and as Francesco Maria bore no prominent part in their varying results, we must be content to pass over them thus cursorily, rather than to carry the reader too far from the more especial object of these volumes. We may, however, pause for a moment upon the reception accorded to the Duke at Venice, when summoned thither to receive public thanks for his services, graphic details of which are supplied by the unedited Diaries of Sanuto. After he had, in compliance with orders from the Signory, disbanded their infantry, and disposed of their cavalry in the mainland garrisons, he proceeded to the maritime capital. At Padua, the rectors had been premonished to pay him every attention; at the mouth of the Brenta, and on the outskirts of the city, he was met by two deputations, each consisting of thirty young men of distinction, and was addressed in a Latin oration, "which he did not understand." He was then escorted to the Rialto; and, after being welcomed by the Doge, and all the foreign ambassadors, except the French, he was led on board the Bucentaur, an honour paid only to highest rank or rarest merit; and thus, amid a flotilla of state galleys and gondolas, crowded with a lively population in gala attire, their princely guest was conducted along the grand canal, its palaces glittering with brocades and arrases, its windows radiant with sparkling eyes and rich carnations, such as Titian and Pordenone loved to commemorate in glowing tints. The Duke wore a suit of black velvet, with frock and cap of scarlet, and was housed in an apartment prepared at the Casa di San Marco, near San Giorgio Maggiore, with fifty ducats a day for his expenses.
- 57. This festive welcome took place on the 25th of June. Next day being Sunday, the Duke presented himself at the Collegio, dressed in black damask over a white doublet, with a rose-coloured cap; a small person, of indifferent presence [poca presentia]. He was received outside of the audience-hall by the Doge and Signory; when admitted, he spoke in a few words, and with low voice, of his constant readiness to serve their state with life and limb. To which the Doge replied, that he had acquitted himself well, but it was their trust that he would do still better in future, and that, being fully assured of his fidelity, they had selected him for captain-general. The privileges of citizenship had been given him many years before, in compliment to his uncle Guidobaldo, but the general's baton was to be conferred upon him on the 2nd of July. In deference, however, to the predictions of an astrologer, he requested that his investiture might take place on the 29th of June, being St. Peter's day. Accordingly, the magnates and diplomatic functionaries of the most luxurious city in Christendom being assembled within its picturesque and time-honoured cathedral, Francesco Maria, was led in, magnificently arrayed in gold lama and damask, amid the din of trumpets and bagpipes. After celebration of high mass, during which he was seated on the Doge's left, the insignia, consisting of a silver baton, and crimson standard with the lion in gold, were blessed at the high altar, and consigned to his hands by the Doge, as badges of authority, which he then swore to employ for the glory of God, and for maintenance and defence of the Republic. This solemnity was hailed by the spectators' shouts, the clang of bells, the crash of martial music, the roar of artillery, and, as the Duke was conducted to his gondola by a long procession of military and civil dignitaries, the gorgeous piazza and gay canals displayed a splendour unwonted even in Venice. Unfavourable rumours of the Duchess's health rendered him impatient to be done with these honours, and were probably the true reason for his desiring that the installation might be accelerated. But the fashionable club or company della Calza so urged his remaining for their festival, which had been fixed for the
- 58. 3rd in compliment to him, that he could not well refuse a short delay in order to be present.[299] The sports were enacted on that usual scene of Venetian magnificence, the grand canal, decked out in many-tinted draperies, and thronged by gay parties. The club, with the Duke of Urbino and other honoured guests, were conveyed in two large flat barges, lashed together and beautifully curtained, wherein assembled the most distinguished youths of both sexes, who revelled in music and dancing as they glided along the glassy surface. At length they stopped at the massive, but now crumbling, Foscari palace, to witness a race of four-oared gondolas, and concluded the entertainment with a supper on the Rialto. Next day their sports were renewed, with addition of a déjeuner, where fancy confections were presented to the principal guests—a triumphal chariot to Francesco Maria, an eagle to the imperial ambassador, and so forth. On the 5th of July, after ten days spent in these monotonous gaieties, the Duke returned to Pesaro in his twelve-oared barge; but his repose there was brief, for the second act soon opened of that bloody drama wherein the ambition of Charles and Francis involved Italy. An incursion of imperialists into Provence under the renegade Bourbon had shifted the scene to France; but the French monarch, by a sudden movement across the Alps, transferred it once more into Lombardy, and took possession of Milan. The Signory hastily summoned their general from his duchy, to guard their frontier. The established order of Italian policy, however, rendering it probable that new and contradictory combinations would speedily arise, his instructions were to act upon the defensive; and a like temporising spirit prevailed in the councils of his Holiness, who secretly lent an ear to proposals of Francis for a combined effort to shake off the Spanish domination in Naples. The Duke's undecided tactics, so condemned by Sismondi, were therefore in accordance with orders, which the ever-present Proveditore took care were complied with. He thus had no share in the great battle of Pavia, which crushed the chivalry of France, accelerated the climax of Italian subjugation, and rendered Spanish influence fatally paramount in Southern Europe. It