On 1 July 2006 McGrath Ltd Enters into an Arrangement

question 27

Multiple Choice

On 1 July 2006 McGrath Ltd enters into an arrangement with a Hong Kong bank to borrow $HK1,500,000. The term of the loan is 3 years with interest payable annually in arrears on 30 June at the rate of 7 per cent. The exchange rate information is:

What journal entries are required in McGrath Ltd's books for 1 July 2006 and 30 June 2007 and 30 June 2008 in accordance with AASB 121 (rounded to the nearest whole $A) ?

---

Definitions:

Capital Gains

The profit from the sale of an asset or investment when the selling price exceeds its purchase price.

Quick Conversion

A process or strategy designed to rapidly convert assets or inventory into cash.

Yields

The yield from an investment, like dividends or interest earned, shown as a percentage of the investment's original cost or its current market value.

Liquidity

The simplicity of transforming an asset or security into cash without impacting its market value.