On 1 July 2014 Waugh Ltd Enters into an Arrangement

question 13

Multiple Choice

On 1 July 2014 Waugh Ltd enters into an arrangement with a US bank-Big Bank-to borrow US$900 000.The term of the loan is 3 years with interest payable annually in arrears on 30 June at the rate of 10 per cent.The exchange rate information is: $$\begin{array} { | l | l | } \hline 1 \text { July } 2014 & \text { A\$1 } = \text { US\$0.45 } \\\hline 30 \text { June } 2015 & \text { A\$1 } = \text { US\$0.55 } \\\hline\end{array}$$ What journal entries are required in Waugh Ltd's books for 1 July 2014 and 30 June 2015 in accordance with AASB 121 (rounded to the nearest whole A$) ?

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Definitions:

Lockbox System

A service provided by banks to process payments by diverting them directly to a special post office box, speeding up the collection process.

Cheques

Cheques are written, dated, and signed instruments that direct a bank to pay a specific sum of money from the cheque writer's account to the person or entity in whose name the cheque has been issued.

Bank Charges

Bank charges are fees imposed by banks for various services, including account maintenance, transactions, overdrafts, and loan management.

Treasury Bills

Short-term government securities issued at a discount from the face value and mature in a year or less, representing a secure, low-risk investment.