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On September 30, 2017, 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, 2019. 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: September 30, 2017 December 31, 2017 September 30, 2018 December 31, 2018 September 30, 2019 $ 0.100 0.105 0.120 0.125 0.150 b. Taking the exchange rate effect on the cost of borrowing into consideration, determine the effective interest rate in dollars on the loan in each of the three years 2017, 2018, and 2019. On June 1, Vandervelde Corporation (a U.S.-based manufacturing firm) received an order to sell goods to a foreign customer at a price of 100,000 leks. Vandervelde will ship the goods and receive payment in three months on September 1. On June 1, Vandervelde purchased an option to sell 100,000 leks in three months at a strike price of $1.00. It properly designated the option as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the spot rate. Relevant exchange rates and option premiums for the lek are as follows: Date June 1 June 30 September 1 Spot Rate $1.00 0.94 0.88 Put Option Premium for September 1 (strike price $1.00) $ 0.020 0.072 N/A Vandervelde's incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. Vandervelde Corporation must close its books and prepare its second-quarter financial statements on June 30. a. Prepare journal entries for the foreign currency option and firm commitment. b. What is the impact on net income over the two accounting periods? c. What is the net cash inflow resulting from the sale of goods to the foreign customer

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