Question
On September 30, 2015, Ericson Company negotiated a two-year, 2,000,000 dudek loan from a foreign bank at an interest rate of 4 percent per year.
On September 30, 2015, Ericson Company negotiated a two-year, 2,000,000 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, 2017. Ericson prepares U.S.-dollar financial statements and has a December 31 year-end. |
September 30, 2015 | $ | 0.200 | |
December 31, 2015 | 0.205 | ||
September 30, 2016 | 0.220 | ||
December 31, 2016 | 0.225 | ||
September 30, 2017 | 0.250 | ||
|
a. | Prepare all journal entries related to this foreign currency borrowing assuming the above exchange rates for 1 dudek. 1. Record the note and conversion of 1 million dudeks into $ at the spot rate. 2. Record the accrued interest for the period 9/30 12/31/15. 3. Record to revalue the note payable at the spot rate, and record the foreign exchange gain/loss thereof. 4. Record the first annual interest payment including any gain or loss on the interest payable accrued at 12/31/15. 5. Record the accrued interest for the period 9/30 12/31/16. 6. Record to revalue the note payable at the spot rate, and record the foreign exchange gain/loss thereof. 7. Record the second annual interest payment including any gain or loss on the interest payable accrued at 12/31/16. 8. Record the payment of 1 million dudek note.
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started