Determine the effective cost of borrowing in dollars

Reference no: EM131975424

Problem

On September 30, 2015, Ericson Company negotiated a two-year, 1,800,000 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, 2017. Ericson prepares U.S.-dollar financial statements and has a December 31 year-end.

September 30, 2015 $ 0.180
December 31, 2015 0.185
September 30, 2016 0.200
December 31, 2016 0.205
September 30, 2017 0.230

a. Determine the effective cost of borrowing in dollars in each of the three years 2015, 2016, and 2017.

Reference no: EM131975424

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