Subject : International Accounting

On September 30, Year 1, the Lester Company negotiated a two-year loanof 1,000,000 markkas from a foreign bank at an interest rate of 5 percent per annum. Interest payments are made every six months and the principal will be repaidon September 30, Year 3. Lester Company prepares U.S.-dollar financial statements and has a December 31 year-end.

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