Reference no: EM133107727

Question 1 - On 1 July 2019, XYZ Ltd entered into an agreement to borrow £4 million from London plc (UK). London plc sends the loan money to XYZ Ltd's Australian bank account. The loan is for four years and requires the payment of interest at the rate of 10 per cent on 30 June each year. XYZ Ltd's reporting date is 30 June. The relevant exchange rates are:

1 July 2019 A$1.00 = UK£0.53

30 June 2020 A$1.00 = UK£0.57

Required - Provide the necessary journal entries that would be made in the books of XYZ Ltd to account for the above transaction for the year ending 30 June 2020.

Question 2 - Assume that for a particular company, the only temporary difference for tax-effect accounting purposes relates to the depreciation of a newly acquired machine. The Machine was acquired on 1 July 2018 at the cost of $800,000. Its useful life is considered to be ?ve years, after which time it is expected to have no residual value. For tax purposes, it can be fully written off over two years. The tax rate is assumed to be 30 per cent.

Required - What would be the deferred tax asset balance or deferred tax liability as of 30 June 2021?