Question 1Firee Ltd has a year end of 28 February and a functional currency of Rands. On 1 March 2016Firee Ltd took out a loan from UK company for £350 00. Interest is payable annually in arrearson 28 February each year at a rate of 5% per annum. The loan is repayable in full on 28 February2018. There have been no repayments on the loan before the 28 February 2018.REQUIRED:Date1 March 201628 February 201728 February 2018Average rate 2017Average rate 2018R/£ exchange rateR21-77R16.25R16.77R16.15R16.201.1 Calculate the exchange differences arising on the loan balance from initial recognition on 1March 2016 to settlement on 28 February 2018.1.2 Calculate the interest accruals and interest payments for February 2017 and February 2018.Show any exchange differences arising on payment. Indicate whether the difference is a gain orloss.1.3 Record the journal entry to recognize the loan on 1 March 2016.Record the journal entries that would be required on 28 February 2017 with respect to theloan and interest.

Journal entries (JE) refers to the entries which reports the daily transactions or the events of…

Firee Ltd has a year end of 28 February and a functional currency of Rands. On 1 March 2016 Firee Ltd took out a loan from UK company for £350 00. Interest is payable annually in arreal on 28 February each year at a rate of 5% per annum. The loan is repayable in full on 28 February 2018. There have been no repayments on the loan before the 28 February 2018. Date 1 March 2016 28 February 2017 28 February 2018 Average rate 2017 Average rate 2018 R/£ exchange rate R21.77 R16.25 R16.77 R16.15 R16.20

Firee Ltd has a year end of 28 February and a functional currency of Rands. On 1 March 2016 Firee Ltd took out a loan from UK company for £350 00. Interest is payable annually in arreal on 28 February each year at a rate of 5% per annum. The loan is repayable in full on 28 February 2018. There have been no repayments on the loan before the 28 February 2018. Date 1 March 2016 28 February 2017 28 February 2018 Average rate 2017 Average rate 2018 R/£ exchange rate R21.77 R16.25 R16.77 R16.15 R16.20

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

PT Kirana is a company engaged in the export and import sector. January 1, 2020 PT Kirana borrowed a total of IDR 150,000,000 from Bank Pelangi for 3 years with a fixed interest rate on the loan of 9% with changes in effective interest rates, while for 2021 and 2022, the effective interest rate uses the formula “Bank Indonesia interest rates. + 2% ”as the basis for determining the loan interest rate. To avoid interest rate fluctuations, PT Kirana signs a variable-payment contract, accepts the effective interest rate (market interest) swaps with a speculator. Requested:a) Make journals to record transactions related to this swaps contract!b) In accordance with the transaction, the transaction is called a transaction? And in what kind of approach?
In mid-July, JK Ltd (a US firm) holds a pay-fixed, receive-floating 6×9 FRA contract which was entered into 6 months ago (i.e. in mid-January). The FRA rate is 0.70% per annum and the notional amount is $20,000,000. The 6×9 FRA reaches expiration now (in mid-July), and the following LIBOR rates are observed from the market: Maturity 30-day LIBOR Interest rate (p.a.) 0.5% 90-day LIBOR 1.1% 180-day LIBOR 1.2% 270-day LIBOR 1.3% Note: The FRA contracts follow the standard US FRA settlement terms and adopt the Actual/360 day count convention. All interest rates are measured with a compounding frequency reflecting the length of the period they apply to. Required: (a) Based on the information above, explain whether JK Ltd makes a gain or loss by showing the settlement amount for JK Ltd to settle the 6×9 FRA at expiration. Report your answer in 2 decimal places (dps). (b) Suppose that JK Ltd plans to take a 20-million 90-day floating-rate loan in mid-October from a local bank. The firm wants…
A Ltd issued a 5% loan note on 1 April 2012 at its face value of K25 million. Direct costs of the issue were K1,500,000. the loan note will be redeemed on 31 March 2015 at a substantial premium. The effective interest rate applicable is 10% per annum. Explain the accounting treatment of the above instrument
On 1 January 2017, a company which prepares financial statement to 30 June each year buys € 400,000 of 5% loan notes for € 411,225. Interest will be received half-yearly on 30 June and 31 December and the loan notes will be repaid at a premium of 10% on 31 December 2020. The effective rate of interest is 3.5% per half year and the company intends to hold this investment until maturity. Calculate the amount of interest income that should be recognised in the company's financial statements for each of the years to 30 June 2017, 2018, 2019. Also calculate the amount at which the loan notes should be shown in the statement
Acorn Ltd had the following loans in place at the end of 2016: 1 Jan.2016 21 Dec. 2016 $m $m 10% Bank loan repayable in 2018 120 120 9.5% Bank loan repayable in 2019 80 80 8.9% Bank loan repayable in 2017 nil 150 The 8.9% loan was issued to fund the construction of a qualifying asset, a mining equipment, construction of which started on 1 July 2016. On 1 January 2016 the company began construction of a piece of hydroelectric plant using existing borrowing. Expenditure incurred and drawn for this construction was as follows: 1 January 2016 - $30m 1 October 2016 - $20m You are required to calculate the amount of borrowing costs to be capitalized for…
On April 1, 2017, Mendoza Company borrowed 500,000 euros for one year at an interest rate of 5 percent per annum. Mendoza must make its first interest payment on the loan on October 1, 2017, and will make a second interest payment on March 31, 2018, when the loan is repaid. Mendoza prepares U.S.-dollar financial statements and has a December 31 year-end. Prepare all journal entries related to this foreign currency borrowing assuming the following exchange rates for 1 euro:
78.
Cassowary Corporation’s balance sheet at December 31, 2016 included a $20,400 account receivable from Quail Corporation of Australia. The account receivable is denominated as 30,000 Australian dollars (A$). Assuming no entries have been made since 12/31/2016, what single entry should Cassowary make on January 16, 2017 when the account receivable is collected and the exchange rate for A$ is $.67? Select one: a. Cash (fc) 20,100 Accounts Receivable (fc) 20,100 b. Cash (fc) 20,100 Exchange Loss 300 Accounts Receivable (fc) 20,400 c. Cash (fc) 20,400 Accounts Receivable (fc) 20,400 d. Cash (fc) 20,700 Accounts Receivable (fc) 20,400 Exchange Gain 300
A partial payment is made on the date indicated. Use the United States rule to determine the balance due on the note at the date of maturity. (The effective date is the date the note was written.) Assume the year is not a leap year. Principal $7000 Rate 3% Effective Date July 15 Partial Payment Date Dec. 24 Amount $4000 Maturity Date Feb. 1
Q6. A financial institution has borrowed a one-year $20 million Eurodollar deposit at an annual interest rate of 1.5 percent. It has invested these proceeds in one-year Euro (€) bonds at an annual rate of 2.5 percent after converting them at the current spot rate of €1.22/$. Both interest and principal are paid at the end of the year. What is the spread earned by the bank at the end of the year if the exchange rate remains at €1.22/$? a) 1.50 percent b) 2.50 percent c) 0.50 percent d) 1 percent e) 2.00 percent