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On September 30, 2013, Ericson Company negotiated a two-year, 1,900,000 dudek loan from a foreign bank at an interest rate of 4 percent per year.
On September 30, 2013, Ericson Company negotiated a two-year, 1,900,000 dudek loan from a foreign bank at an interest rate of 4 percent per year. It makes interest payments annually on September 30 and will repay the principal on September 30, 2015. Ericson prepares U.S.-dollar financial statements and has a December 31 year-end. September 30, 2013 $ 0.190 December 31, 2013 0.195 September 30, 2014 0.210 December 31, 2014 0.215 September 30, 2015 0.240 a. Prepare all journal entries related to this foreign currency borrowing assuming the above exchange rates for 1 dudek. (Do not round intermediate calculations.) Date General Journal Debit Credit 9/30/13 To record the note and conversion. 12/31/13 To record accrue interest. To record foreign exchange loss. 9/30/14 To record first annual interest payment. 12/31/14 To record accrue interest. To record foreign exchange loss. 9/30/15 To record second annual interest payment. To record payment. b. Determine the effective cost of borrowing in dollars in each of the three years 2013, 2014, and 2015. (Do not round intermediate calculations.) Effective Cost of Borrowing 2013 $ 2014 $ 2015 $
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