Translation of foreign currency borrowings and interest costs LO3, 6 On 1 October 2019, the Australian
Question:
Translation of foreign currency borrowings and interest costs LO3, 6 On 1 October 2019, the Australian company Run Down Ltd enters a loan agreement with the Bank of Scotland to borrow £2 000 000 for a period of 5 years. The interest on the borrowings is payable half-yearly in arrears at the fixed interest rate of 10% p.a. with interest payments of £100 000 (i.e. £2 000 000 × 10% × ½ year) due on 31 March and 30 September each year. The functional currency of Run Down Ltd is A$. It has reporting periods ending on 31 December and 30 June. Applicable exchange rates during the financial period ending 30 June 2020 are as follows. 1 Oct. 2019 A$1 = £0.42 31 Dec. 2019 A$1 = £0.40 31 Mar. 2020 A$1 = £0.38 30 June 2020 A$1 = £0.36 Required In accordance with AASB 121/IAS 21, prepare the entries of Run Down Ltd to record the borrowing transaction, the borrowing costs expense, the borrowings costs paid and the remeasurement of the borrowings at the end of the reporting period.
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Financial Reporting
ISBN: 978-0730363361
2nd Edition
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