2 On April 1, 2017, Mendoza Company borrowed 480,000 euros for one year at an in

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2 On April 1, 2017, Mendoza Company borrowed 480,000 euros for one year at an interest rate of 5 percent per annum. Mendoza must make its first interest payment on the loan on October 1, 2017 and will make a second interest payment on March 31, 2018 when the loan is repald. Mendoza 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 euro: 25 ints April 1, 2017 October 1, 2017 December 31, 2017 March 31, 2018 s 1.12 1.22 1.26 1.30 eBook Print View transaction list Journal entry worksheet Record the borrowal of the foreign loan Note: Enter debits before credits. Date General Journal Debit Credit 04/01/2017 K Prey 2 of 5 Next>

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Answer

Journal entries related to this foreign currency borrowing:

Date Particulars Dr Cr Apr 1,2017 Cash 537600 Loan (short - term)(480000*1.12) 537600 Oct 1,2017 Interest exp (480000*2.5%*1.22) 14640 Cash 14640 Dec.31,2017 Interest exp(480000*2.5%*1.26/2) 7560 Accrued Interest 7560 Dec.31,2017 Foreign exchange loss(480000(1.26-1.12)) 67200 Loan (Short - term) 67200 March 31,2017 Interest exp(480000*2.5%*1.30/2) 7800 Accrued Interest 7560 Foreign exchange loss(15600-7800-7560) 240 Cash(480000*2.5%*1.30) 15600 March 31,2017 Loan (Short - term)(537600+67200) 604800 Foreign exchange loss 19200 Cash(480000*130) 624000

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