On 1 October 2022, the Australian company Pilkari Ltd enters a loan agreement with the Bank of
Question:
On 1 October 2022, the Australian company Pilkari Ltd enters a loan agreement with the Bank of Scotland to borrow £2 000 000 for a period of 5 years. The interest on the borrowings is payable half-yearly in arrears at the fixed interest rate of 10% p.a. with interest payments of £100 000 (i.e. £2 000 000 × 10% × ½ year) due on 31 March and 30 September each year. The functional currency of Pilkari Ltd is A$. It has reporting periods ending on 31 December and 30 June. Applicable exchange rates during the financial period ending 30 June 2023 are as follows.
Required
In accordance with AASB 121/IAS 21, prepare the entries of Pilkari Ltd to record the borrowing transaction, the borrowing costs expense, the borrowings costs paid and the remeasurement of the borrowings at the end of the reporting period.
Step by Step Answer:
Financial Reporting
ISBN: 9780730396413
4th Edition
Authors: Janice Loftus, Ken Leo, Sorin Daniliuc, Belinda Luke, Hong Nee Ang, Mike Bradbury, Dean Hanlon, Noel Boys, Karyn Byrnes