Question 6 (7 marks)

On 1 July 2019 Bassy Ltd enters into an agreement to borrow 3 million from London plc (UK). London plc sends the loan money to Bassy Ltds Australian bank account. The loan is for four years and requires the payment of interest at the rate of 9 per cent on 30 June each year. Bassy Ltds reporting date is 30 June. The relevant exchange rates are:

1 July 2019 A$1.00 = UK0.50

30 June 2020 A$1.00 = UK0.54

Required:

Provide the necessary journal entries that would be made in the books of Bassy Ltd to account for the above transaction for the year ending 30 June 2020. (7 marks)

ANSWER: