Q3 Problem Solving (15 marks) In order to take advantage of lower U.S. interest rates, Zhang Ltd. borrowed $8 million from a U.S. bank on 1 May 20X2. Annual interest, at 7 1/2%, was due each subsequent 1 May, with lump-sum principal due on 1 May 20X5. Zhang Ltd. has a 31 December year-end. Exchange rates were as follows: 1 May 20X2 31 December 20X2 1 May 20X3 31 December 20X3 Average, 1 May 20X2 - 31 December 20X2 Average, 1 January 20X3 - 31 December 20X3 US$1 = Sdn$1.07 1.10 1.12 1.09 1.09 1.07 Required: 1. Calculate the loan principal that would appear on the 31 December 20X2 and 20X3 statement of financial position and the related exchange gain or loss in 20x2 and 20X3. 2-a. Calculate interest expense for the years ended 31 December 20X2 and 20X3. 2-c. Calculate this gain or loss for the year ended 31 December 20X2. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.) |