On June 30, 2020, W Inc., a UK based company, borrowed $200,000 US from a bank in the United States. The loan is to be repaid in full on June 30, 2025. Interest at 5% is to be paid semi-annually on June 30^th and December 31^st each year. Exchange rates for the US$ were as follows:

June 30, 2020 US $1 = 0.99

December 31, 2020, US $1= 1.02

Average for 2020 US $1= 1.06

Woodpine Inc. has a December 31^st year-end.

Required:

1. Prepare all journal entries related to the bank loan for 2020.

2. Woddbine has been using Sterling pound as its functional currency, however it begun to grow and started exporting heavily to Europe, were it conducts its business through a branch. For the past two years (2019 & 2020), ninety percent of the business was conducted using the Euro as the business currency. Based on the information given above and in accordance with IAS 21, what should be the functional currency of Woodbine as at 31 December 2021? Provide justification for your answer.