Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik

Exercise 44

On September 30, 2011, 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, 2013.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:
b.Determine the effective cost of borrowing in dollars in each of the three years 2011, 2012, and 2013.