I need part A answered. I also need as much as you can put on the income stateme

Question

I need part A answered. I also need as much as you can put on the income statement and balance sheet. Obviously I know its not a full one for those two. Just the parts that are drawn from part A.

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

Explanation / Answer

Solution:

a) Journal Entries with Income Statement (Profit & Loss Account) and Balance Sheet

Year 2017

Year 2018

Year 2019

Note: * Term used P&L denotes Income Statement

Date Accounting Enries Debit Credit Sept. 30, 2017 $ Bank 100000 Loan 100000 ( Being Loan taken) 31.12.2017 $ Interest 525 Interest payable on loan 525 (Interest accrued on Loan taken) 1000000*2%*3/12*.105 31.12.2017 $ P&L* 5000 Loss due to exchange difference 5000 1000000*$(.105-.100) (Loss due to exchange difference transfer to P&L Account)

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