On 1 July 2022, Jimbour Ltd Enters a Loan Agreement

Multiple Choice

On 1 July 2022, Jimbour Ltd enters a loan agreement with the Bank of New Zealand to borrow NZ$200 000. The funds are to be used to purchase materials needed for the construction of a manufacturing plant. By 31 December 2022, additional costs of A$75 000 have been paid to complete the manufacturing plant. Interest on the funds borrowed is payable half-yearly in arrears at the fixed interest rate of 5% p.a. Relevant exchange rates are: 1 July 2022 NZ$1.00 = A$0.75
Average July to December 2022 NZ$1.00 = A$0.77
31 December 2022 NZ$1.00 = A$0.85
Average January to June 2023 NZ$1.00 = A$0.80
30 June 2023 NZ$1.00 = A$0.70
The interest expense and any foreign exchange gain or loss on the interest at 31 December 2022 is:

A) Interest expense A$3 850; Foreign exchange gain A$400
B) Interest expense A$3 850; Foreign exchange loss A$400.
C) Interest expense A$6 494; Foreign exchange loss A$611..
D) Interest expense A$6 494; Foreign exchange loss A$611