Comprehensive Minerals NL Borrowed US$35 000 000 from a Syndicate

question 9

Multiple Choice

Comprehensive Minerals NL borrowed US$35 000 000 from a syndicate of European bankers. The agreement was finalized on 1 June 20X5, the money was received on 1 July 20X5, and interest at 4% per half year is payable on 31 December and 30 June of each year. The company’s functional currency is the A$.
The following exchange rates applied.
$\begin{array} { l l l l } \text { 1 June 20X5 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.33 \\\text { 1 July 20X5 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.38 \\\text { 31 December 20X5 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.15 \\\text { 30 June 20X6 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.25 \\\text { 31 December 20X6 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.35 \\\text { 30 June 20X7 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.20\end{array}$

-In the company's financial statements for the reporting period ending 30 June 20X6 the following items will appear:

• A)interest expense A$3 500 000; foreign currency denominated loan A$43 750 000
• B)interest expense A$3 360 000; foreign currency denominated loan A$43 750 000
• C)interest revenue A$3 500 000; foreign currency denominated loan A$43 750 000
• D)interest expense A$3 864 000; foreign currency denominated loan A$43 750 000

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