On 1 July 2005 Jarrets Ltd Borrows £500,000 from a British

Multiple Choice

On 1 July 2005 Jarrets Ltd borrows £500,000 from a British bank at an interest rate of 8 per cent, repayable in pounds sterling (£) and with interest due on 30 June each year. The term of the loan is 3 years. On the same date Fitners Ltd borrows $A1 million from an Australian bank at an interest rate of 10 per cent. The term of the loan is 3 years. Jarrets and Fitners decide to swap their interest and principal obligations on 1 July 2005. Exchange rate information is as follows:

Both Jarrets and Fitners are Australian companies. What are the journal entries to record the swap for the period ended 30 June 2006 in Jarrets Ltd's books (rounded to the nearest whole $A) ?

A)
B)
C)
D)
E) None of the given answers.