On September 30, 2013, Ericson Company negotiated a two-year, 2,400,000 Dudek loan from a foreign bank at an interest rate of 4 percent per year. It makes interest payments annually on September 30 and will repay the principal on September 30, 2015. Ericson prepares U.S.-dollar financial statements and has a December 31 year-end.

September 30, 2013……………………….$0.130

December 31, 2013…………………………0.135

September 30, 2014………………………...0.150

December 31, 2014…………………………0.155

September 30, 2015………………………...0.180

a. Prepare all journal entries related to this foreign currency borrowing assuming the above exchange rates for 1 Dudek.

b. Determine the effective cost of borrowing in dollars in each of the three years 2013, 2014, and 2015.

Answer rating: 100% (QA)

a Date Account Name Debit Amount Credit Amount 30Sep13 Cash 312000 Ac... View the full answer