Question 4 On 1 July 2014 Air town Ltd entered into an arrangement with a Hong Kong bank to borrow $HK 1,500,000. The term of the loan was 3 years with interest payable annually in arrears on 30 June at the rate of 5 per cent. The exchange rate information is: 1 July 2014 $A1 = $HK5.25 30 June 2015 $Al = $HK4.50 30 June 2016 $Al = $HK5.50 30 June 2017 $11 =$HK5.80 Required: Prepare the journal entries required in Air town Ltd's books for 1 July 2014, 30 June 2015, 30 June 2016 and 30 June 2017 in accordance with AASB 121 (rounded to the nearest Whole $A). Answers 1 July 2014 Dr Cash 285 714 Cr Loan payable 235 714 (New loan balance $1,500,000!5.25 =$285 30 June 2015 Dr Interest expense 16 66? Cr Cash at bank 16 66? ($1,500,000 x 5%)!45 Dr Foreign exchange loss 47 619 Cr Loan payable 4? 619 (New loan balance $1,500,000!4.5 =$333 333)