On September 30, 2015, Ericson Company negotiated a 2-year, 1,000,000 dudek loan from a foreign bank at

Question:

On September 30, 2015, Ericson Company negotiated a 2-year, 1,000,000 dudek loan from a foreign bank at an interest rate of 2 percent per year. It makes interest payments annually on September 30 and will repay the principal on September 30, 2017. Ericson prepares U.S.-dollar financial statements and has a December 31 year-end.

a. Prepare all journal entries related to this foreign currency borrowing assuming the following exchange rates for 1 dudek:

September 30, 2015 ..........$0.100

December 31, 2015 .......... 0.105

September 30, 2016 .......... 0.120

December 31, 2016 .......... 0.125

September 30, 2017 .......... 0.150

b. Determine the effective cost of borrowing in dollars in each of the three years 2015, 2016, and 2017.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...