Journal entries for borrowing Sappi Limited, a South African paper com

QUESTION

Journal entries for borrowing Sappi Limited, a South African paper company, reports non-current Interest-Bearing Borrowings of $1,634 million at September 30, 2006. Sappi Limited applies IFRS, and reports its results in millions of U.S. dollars. At September 30, 2007, this balance had increased to $1,828 million. Assume that on March 30, 2007, Suppi Limited borrowed $1,200 million from a local bank. The loan bears interest at an annual rate of 7.5% and is due on March 31, 2009. Assume also that Sappi Limited makes its interest payments once per year on the last day of March. Sappi Limiteds fiscal year begins October 1 and ends on September 30. The firm closes its books on September 30 of each war.a. What journal entry did Sappi Limited record for the repayment of debt during the fiscal year ending September 30, 2007?b. Present the journal entries that Sappi Limited made in fiscal years ending September 30, 2007, 2008, and 2009, related to the bank loan obtained on March 30, 2007.
Answer A $ in million Date Particulars Debit Credit 30-Sep-07 Borrowings $ 1,006.00 Cash $ 1,006.00 Borrowings As on September 30, 2006 $ 1,634 million New borrowing On March 30, 2007 $ 1,200 million Total Borrowings as on March 30, 2007 $ 2,834 million less: As on September 30, 2007 $ 1,828 million Repayment of Debt $ 1,006 million Answer B Date Particulars Debit Credit 30-Sep-07 Interest Expense $ 92.10 Interest Payable $ 92.10 30-Sep-08 Interest Expense $ 137.10 Interest Payable $ 137.10 30-Sep-09 Interest Expense $ 137.10 Interest Payable $ 137.10 Borrowings As on September 30,

2007 $ 1,828 less: $ 1,200 New borrowing On March 30, 2007 Old Borrowings $ 628 Interest on new borrowing As on September 30, 2007 $ 45.00 (7.5% on $ 1,200 for 6 months) Interest on old borrowing $ 47.10 (7.5% on $ 628 for one year) Total Interest $ 92.10 Interest As on September 30, 2008 Interest on $ 1828 @ 7.5% $ 137.10 Interest As on September 30, 2009 Interest on $ 1828 @ 7.5% $ 137.10

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