On July 1, 2015 the Skywalker Company (American) buys a 3 year 100,000 C$ 10% CD

Question

On July 1, 2015 the Skywalker Company (American) buys a 3 year 100,000 C$ 10% CD from C3PO bank (Canadian) when $1 =1 C$. This CD pays interest annually on July 1. The exchange rates for the Canadian and US dollars are as follows:

July 1, 2015 $1 = 1C$   (C$ is Canadian dollar)

December 31, 2015 $1 = .90 C$

July 1, 2016 $1 = 1 C$

December 31, 2016 $1 = 1.05 C$

July 1, 2017 $1 = 1.10 C$

December 31, 2017 $1 = .98 C$

July 1, 2018 $1 = .88 C$

REQUIRED: MAKE ALL THE NECESSARY JOURNAL ENTRIES FOR SKYWALKER CONNECTED WITH THIS CD…DON’T FORGET ADJUSTING ENTRIES ON DECEMBER 31!!!

Explanation / Answer

Date Account Title Debit Credit 1-Jul-15 10% CD $ 100,000.00 Cash $100,000.00 31-Dec-15 Interest Receivable $      5,555.56 Accrued Interest $     5,555.56 1-Jul-16 Cash $    10,000.00 Interest Receivable $     5,000.00 Interest income 5000 Accrued Interest $      5,555.56 Interest Receivable 555.56 Interest income $     5,000.00 31-Dec-16 Interest Receivable $      4,761.90 Accrued Interest $     4,761.90 1-Jul-17 Cash $      9,090.90 Interest Receivable $     4,545.45 Interest income 4545.45 Accrued Interest $      4,545.45 Interest Receivable 216.45 Interest income 4761.90 Interest earned on CD in C$ (100,000 x 10%/2) $     5,000.00

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