On April 1, 2017, Mendoza Company borrowed 518,000 euros for one year at an interest rate of 5 percent per annum. Mendoza must make its first interest payment on the loan on October 1, 2017 and will make a second interest payment on March 31, 2018 when the loan is repaid. Mendoza prepares U.S.-dollar financial statements and has a December 31 year-end. Prepare all journal entries related to this foreign currency borrowing assuming the following exchange rates for 1 euro:
April 1, 2017 $1.10
October 1, 2017 1.20
December 31, 2017 1.24
March 31, 2018 1.28
Journal entry worksheet
Record the borrowal of the foreign loan.
04/01/2017
Record the first interest payment on the foreign loan.
10/01/2017
Record the year end interest accrual on the foreign loan.
12/31/2017
Record the year end adjustment to the foreign loan.
12/31/2017
Record the second interest payment and foreign exchange loss/gain.
03/31/2018
Record the repayment of the loan and foreign exchange loss/gain.
03/31/2018
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