Create a balance sheet and manage accounting entries, Accounting Basics

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Two companies enter into loan agreements on 1 March 2012. On that date they also enter into an agreement to swap the loans. The details for each company and loan are:

L R R Hood Ltd   B B Wolf Ltd

US company       US company

Borrows £stg1,500,000   Borrows $US 4,980,080

Interest rate 8 per cent payable annually              Interest rate 11 per cent payable annually

Repayable in £stg             Repayable in $US

Loan repayable in 3 years             Loan repayable in 3 years

Exchange rates:

1 March 2012     $US 1.00 = £stg0.3012

30 June 2012      $US 1.00 = £stg0.2980

The balance date for both companies is 30 June.

Required

What are the accounting entries in the books of L R R Hood Ltd on 1 March and 30 June 2012?


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