On September 30, 2009, Ericson Company negotiated a two-year, 1,000,000 dudek loan from a foreign bank at
Question:
On September 30, 2009, Ericson Company negotiated a two-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, 2011. 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: LO9 September 30, 2009
$0,100 December 31, 2009 0.105 September 30, 2010 0.120 December 31, 2010 0.125 September 30, 2011 0.150
b. Determine the effective cost ofborrowing in dollars in each ofthe three years 2009, 2010, and 2011.
Step by Step Answer:
Advanced Accounting
ISBN: 9780073379456
9th Edition
Authors: Joe Ben Hoyle, Timothy S. Doupnik, Thomas F. Schaefer, Oe Ben Hoyle