On September 30, 2017, Ericson Company negotiated a two-year, 1,800,000 dudek lo

Question

On September 30, 2017, Ericson Company negotiated a two-year, 1,800,000 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, 2019. Ericson 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 2 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 – 12/31/17.

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 09/30/18.

5. Record the accrued interest for the period 9/30 – 12/31/18.

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 09/30/19.

8. Record the payment of 1 million dudek note.

September 30, 2017 $ 0.180 December 31, 2017 0.185 September 30, 2018 0.200 December 31, 2018 0.205 September 30, 2019 0.230

Explanation / Answer

As per Chegg only Four part of 1 question is allowed.

S. No. Date Account Name Debit Credit 1 30-Sep-17 Cash $324,000.00 Notes payable (1800000 x 0.18) $324,000.00 2 31-Dec-17 Interest expense (1800000 x 4% x 3/12 x 0.185) $3,330.00 Interest payable $3,330.00 3 31-Dec-17 Foreign exchange loss (1800000 x {0.185-0.180}) $9,000.00 Notea payable $9,000.00 4 30-Sep-18 Interest expense $11,070.00 Interest payable $3,330.00 Cash [1800000 x 4% x 0.200] $14,400.00

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