Question

Polar Limited is a Canadian company that recently completed two large transactions with companies based in Germany:
1. On July 1, 20X4, Polar acquired equipment at a cost of € 500,000 from Bier Ltd. Polar received reasonable terms regarding this purchase acquisition. The € 500,000 was in the form of a note payable to be paid on June 30, 20X7, at an interest rate of 6% per year, the interest to be paid semi-annually on December 31 and June 30.
2. On October 1, 20X4, Polar also sold inventory that cost C$ 100,000 to another German company, Wein Ltd., for € 87,500. Payment is due from Wein on March 1, 20X5. Polar uses a perpetual inventory system. The spot rates for the euro were as follows:
July 1, 20X4....................... C$ 1.00 = € 0.650
October 1, 20X4...................... C$ 1.00 = € 0.750
December 31, 20X4.................... C$ 1.00 = € 0.800
Average rate July 1–December 31, 20X4............. C$ 1.00 = € 0.770
Average rate 20X4..................... C$ 1.00 = € 0.700
March 1, 20X5...................... C$ 1.00 = € 0.850

Required
1. Prepare all journal entries regarding Polar’s notes payable and interest- related transactions on July 1, 20X4, and December 31, 20X4.
2. Prepare all journal entries regarding Polar’s sales, cost of sales, and accounts receivable transactions on October 1, 20X4; December 31, 20X4; and March 1, 20X5.



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  • CreatedMarch 13, 2015
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