In: Accounting
On March 1st 2017 American Company purchased a one-million Euro CD when one Euro = one dollar. | ||||||||
This 3 year 12% CD pays interest semi-annually to American Company on March 1st and September 1st. | ||||||||
Additional information is as follows: | ||||||||
3/1/2017 | 1 Euro worth $1.00 | |||||||
9/1/2017 | 1 Euro worth $1.01 | |||||||
12/31/2017 | 1 Euro worth $1.04 | |||||||
3/1/2018 | 1 Euro worth $1.02 | |||||||
9/1/2018 | 1 Euro worth $0.99 | |||||||
12/31/2018 | 1 Euro worth $0.95 | |||||||
3/31/2019 | 1 Euro worth $0.90 | |||||||
9/1/2019 | 1 Euro worth $0.96 | |||||||
12/31/2019 | 1 Euro worth $0.98 | |||||||
3/1/2020 | 1 Euro worth $1.03 | |||||||
Required: make all the necessary journal entries for American Company connected with purchase of the CD for 2017 through 2020 | ||||||||
hint: don't forget adjusting entries at the end of each year. |
Date | General Journal | Debit | Credit | |
01/03/17 | Bank | $10,00,000 | ||
To CD | $10,00,000 | |||
(Being one million euro cd taken) | ||||
01/09/17 | Interest expense | $60,600 | (1,000,000*12%*1.01)/2 | |
To Bank | $60,600 | |||
(Being half year interest paid) | ||||
31/12/17 | Interest expense | $41,600 | (1,000,000*12%*1.04)/12*4 | |
To Accrued interest | $41,600 | |||
(Being interest expense for 4 months booked) | ||||
31/12/17 | Foreign exchnage loss | $40,000 | (1,000,000*(1.04-1.00)) | |
To CD | $40,000 | |||
(being foreign exchange loss recognised.) | ||||
01/03/18 | Interest expense | $20,400 | (1,000,000*12%*1.02)/12*2 | |
Accrued interest | $41,600 | |||
To Foreign exchnage gain | $800 | |||
To Bank | $61,200 | (1,000,000*12%*1.02)/2 | ||
(Being interest for the half year paid) | ||||
01/09/18 | Interest expense | $59,400 | (1,000,000*12%*0.99)/2 | |
To Bank | $59,400 | |||
(Being half year interest paid) | ||||
31/12/18 | Interest expense | $38,000 | (1,000,000*12%*0.95)/12*4 | |
To Accrued interest | $38,000 | |||
(Being interest expense for 4 months booked) | ||||
31/12/18 | CD | $90,000 | (1,000,000*(0.95-1.04)) | |
To Foreign exchnage gain | $90,000 | |||
(being foreign exchange gain recognised.) | ||||
01/03/19 | Interest expense | $18,000 | (1,000,000*12%*0.90)/12*2 | |
Accrued interest | $38,000 | |||
To Foreign exchnage gain | $2,000 | |||
To Bank | $54,000 | (1,000,000*12%*0.90)/2 | ||
(Being interest for the half year paid) | ||||
01/09/19 | Interest expense | $57,600 | (1,000,000*12%*0.96)/2 | |
To Bank | $57,600 | |||
(Being half year interest paid) | ||||
31/12/19 | Interest expense | $39,200 | (1,000,000*12%*0.98)/12*4 | |
To Accrued interest | $39,200 | |||
(Being interest expense for 4 months booked) | ||||
31/12/19 | Foreign exchnage loss | $30,000 | (1,000,000*(0.98-0.95)) | |
To CD | $30,000 | |||
(being foreign exchange Loss recognised.) | ||||
01/03/20 | Interest expense | $20,600 | (1,000,000*12%*1.03)/12*2 | |
Accrued interest | $39,200 | |||
Foreign exchnage loss | $2,000 | |||
To Bank | $61,800 | (1,000,000*12%*1.03)/2 | ||
(Being interest for the half year paid) | ||||
01/03/20 | CD | $9,80,000 | ||
Foreign exchnage loss | $50,000 | |||
To Bank | $10,30,000 | |||
(Being CD repaid) |