On 1 July 2005 Jarrets Ltd Borrows £500,000 from a British

question 13

Multiple Choice

On 1 July 2005 Jarrets Ltd borrows £500,000 from a British bank at an interest rate of 8 per cent,repayable in pounds sterling (£) and with interest due on 30 June each year.The term of the loan is 3 years.On the same date Fitners Ltd borrows $A1 million from an Australian bank at an interest rate of 10 per cent.The term of the loan is 3 years.Jarrets and Fitners decide to swap their interest and principal obligations on 1 July 2005.Exchange rate information is as follows: Both Jarrets and Fitners are Australian companies.What are the journal entries to record the swap for the period ended 30 June 2006 in Fitners Ltd's books (rounded to the nearest whole $A) ?

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Definitions:

Disinflation

Occurs when the rate of inflation declines.

Monetarist View

An economic theory which argues that management of the nation's money supply is the key to controlling inflation and other forms of economic instability.

Economic Stabilization

Efforts or policies aimed at maintaining economic growth, controlling inflation, and reducing unemployment to achieve a stable economy.

Discretionary Policies

Economic strategies and decisions made by a government that can be altered or adjusted in response to changing economic conditions.