Adv accounting unit 6

For this assignment, use your Fundamentals of Advanced Accounting text to complete the following:

· Problem 30 on page 377. Apply your knowledge of the accounting effects of foreign currency borrowings to prepare the necessary journal entries and calculate the effective cost of borrowing.

30.On September 30, 2017, Ericson Company negotiated a two-year, 1,000,000 dudek loan from a foreign bank at an interest rate of 2 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.

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

September 30, 2017	$0.100
December 31, 2017	0.105
September 30, 2018	0.120
December 31, 2018	0.125
September 30, 2019	0.150

b. Taking the exchange rate effect on the cost of borrowing into consideration, determine the effective interest rate in dollars on the loan in each of the three years 2017, 2018, and 2019.