On 1 July 2004 Waugh Ltd Enters into an Arrangement

question 22

Multiple Choice

On 1 July 2004 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: What journal entries are required in Waugh Ltd's books for 1 July 2004 and 30 June 2005 in accordance with AASB 121 (rounded to the nearest whole $A) ?

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Definitions:

Heckscher-Ohlin Model

An economic theory that proposes countries will export products that utilize their abundant and cheap factors of production and import products that require factors of production that are scarce and expensive domestically.

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.

Increasing Returns

A situation in economics where an increase in the amount of inputs leads to a greater proportional increase in the amount of output.

Factor Endowments

The amount of land, labor, capital, and entrepreneurship that a country possesses and can exploit for manufacturing and service provision.