Saffron Enterprises Inc., a U.S.-based company, purchases a 4 percent bond denominated in euros for $1,500 on January 1, Year 1, when the exchange rate is $1.50 per euro. (In other words, the purchase price was 1,000 euros.) The bond was purchased at par value. At December 31, Year 1, the fair value of the bond in the marketplace is 1,050 euros and the exchange rate is $1.40 per euro. Saffron classifies its investment in bonds as available for sale.
Required:
Prepare the journal entries that Saffron Enterprises should record in Year 1 related to its investment in euro-denominated bonds.