Borrow Overseas Corp. (BOC) is a Canadian company that reports its financial results in Canadian dollars in accordance with IFRS. On December 31, 20X5, BOC’s year end, the company borrowed €1,000,000. This two-year loan is repayable in full on December 31, 20X7. Interest is payable annually at 6% with the first interest payment due on December 31, 20X6. Pertinent exchange rate information follows: Date Exchange rate
December 31, 20X5 €1.00 = C$1.4267December 31, 20X6 €1.00 = C$1.4345December 31, 20X7 €1.00 = C$1.4129Average rate for December 20X6 €1.00 = C$1.4322Average rate for December 20X7 €1.00 = C$1.4143Average rate for 20X6 €1.00 = C$1.4306Average rate for 20X7 €1.00 = C$1.4188Required:
Prepare separate journal entries to reflect all events during the lifetime of the loan that impacts BOC’s year-end financial statements. Support the journal entries with a brief explanation as to their nature. Include supporting calculations in the journal entries or reference their location elsewhere on the worksheet.