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) ?

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Definitions:

Legal Relations

The relationships between individuals or organizations that are defined and regulated by law, including rights, duties, and liabilities.

Agency Law

Legal principles and rules governing the relationship where one party, the agent, is authorized to act on behalf of another, the principal, in dealings with third parties.

Business Activity

Any action undertaken by individuals or companies involving the production, distribution, or sale of goods and services.

Principals

In a commercial context, the parties who enter into a contract or agreement, authorizing agents to act on their behalf in transactions.