Provide the necessary journal entries that would be made

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Question - 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 -

(a) 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.

(b) In your own words, briefly explain a 'qualifying asset' and how we report exchange rate differences relating to the acquisition of qualifying assets? Contrast this with the treatment for assets that are not qualifying assets.

Reference no: EM133120721

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