Posted: July 12th, 2016

What is the carrying value at the end of the first year?

On September 30,2010 Lanter Company issued 0,000 worth of 5-year, 9% bonds when the market rate was 8%. Proceeds were $104,000. The interest is paid annually on September 30.

A. What is the annual interest expense?
B. What is the amount of interest expense on the date of the first interest payment?
C. What is the carrying value at the end of the first year?
1. A foreign currency transaction gain will be recognized by a U.S. company when it has a receivable from a foreign company
a. denominated in dollars and the foreign currency weakens relative to the dollar before payment is received.
b. denominated in foreign currency and the foreign currency strengthens relative to the dollar before payment is received.
c. denominated in dollars and the foreign currency strengthens relative to the dollar before payment is received.
d. denominated in foreign currency and the foreign currency weakens relative to the dollar before payment is received.

2. On October 1, 2008, a U.S. company acquired goods from a Japanese company for 840,000 yen, payable in yen on April 1, 2009. Spot rates on various dates follow:
Transaction date 100.0 yen = 1 US dollar
Balance Sheet date (12/31/08) 87.5 yen = 1 US dollar
Settlement date 120.0 yen = 1 US dollar

As a result of this transaction, the U.S. company has a foreign currency transaction gain (loss) in 2008 and 2009 of (rounded):

2008 2009
a. $(1,200) $2,600
b. $1,400 $1,200
c. $1,200 $(2,600)
d. $(1,200) $1,400