nd wants to lock in a rate of 7%. As a result, Karr enters ve LIBOR based on $6 million. The variable rate is reset st expense will be reported for this note and the related s 36)
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- On January 2, 2020, Parton Company issues a 5-year, $10,000,000 note at LIBOR, with interest paid annually. The variable rate is reset at the end of each year. The LIBOR rate for the first year is 5.8%. Parton Company decides it prefers fixed-rate financing and wants to lock in a rate of 6%. As a result, Parton enters into an interest rate swap to pay 6% fixed and receive LIBOR based on $10 million. The variable rate is reset to 6.6% on January 2, 2021. Instructions a. Compute the net interest expense to be reported for this note and related swap transactions as of December 31, 2020. b. Compute the net interest expense to be reported for this note and related swap transactions as of December 31, 2021.On January 2, 2020, MacCloud Co. issued a 4-year, $100,000 note at 6% fixed interest, interest payable semiannually. MacCloud now wants to change the note to a variable-rate note. As a result, on January 2, 2020, MacCloud Co. enters into an interest rate swap where it agrees to receive 6% fixed and pay LIBOR of 5.7% for the first 6 months on $100,000. At each 6-month period, the variable rate will be reset. The variable rate is reset to 6.7% on June 30, 2020. Instructions a. Compute the net interest expense to be reported for this note and related swap transaction as of June 30, 2020. b. Compute the net interest expense to be reported for this note and related swap transaction as of December 31, 2020.Hello, I have attached the full question below, but I just need help with a few parts, not the whole thing. I have also attached a screenshot of what I already have. I understand this question is complex, but can someone please help. On January 1, 2021, LLB Industries borrowed $200,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to receive payment based on a 10% fixed interest rate on a notional amount of $200,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 10% at January 1, 8% at March 31, and 6% at June 30, 2021. The fair values of the…
- On January 2, 2020, Wildhorse Corp. issues a $8-million, five-year note at LIBOR, with interest paid annually. To protect against the cash flow uncertainty related to interest payments that are based on LIBOR, Wildhorse entered into an interest rate swap to pay 4% fixed and receive LIBOR based on $8 million for the term of the note. The LIBOR rate for the first year is 3.7%. The LIBOR rate is reset to 4.7% on January 2, 2021. Wildhorse follows ASPE and uses hedge accounting. On December 31, 2020, the fair value of the swap decreased by $13,500: it increased by $4,000 on December 31, 2021. Assume that the criteria for hedge accounting under ASPE are met. Calculate the net interest expense to be reported for this note and related swap transactions as at December 31, 2020 and 2021. The net interest expense to be reported eTextbook and Media List of Accounts December 31, 2020 $ $ December 31, 2021 Prepare the journal entries relating to the interest for the years ended December 31, 2020…. On April 30, 2022, Lenny Inc. borrowed $10 million cash from Colonial Bank and issued a 5-month, noninterest-bearing note, priced to yield an effective interest rate of 10%. The stated discount rate on this loan is: A. More than the effective interest rate. B. Less than the effective interest rate. C. Equal to the effective interest rate. D. Unrelated to the effective interest rateOn January 1, 2020, Sheridan Technical Inc. issues a 5-year, 6% fixed-rate interest only, nonprepayable $5,100,000 note with interest payable on June 30 and December 31 of each year. Sheridan decides to change the interest rate from a fixed rate to variable rate and enters into a swap agreement with Last Bank Financial. The swap agreement specifies that Sheridan will receive a fixed rate at 6% and pay variable with settlement dates that match the interest payments on the debt. Assume that interest rates have increased during 2020 and that Sheridan paid $34,900 as an adjustment to interest expense for the settlement at June 30, 2020. The gain related to the debt (due to interest rate changes) was $111,000. The value of the obligation under the swap contract increased $111,000. (a) Prepare the journal entry to record the payment of interest expense on June 30, 2020. (b) Prepare the journal entry to record the receipt of the swap settlement on June 30, 2020. (c) Prepare the…
- 1. On January 1, 2022, Balance Bar Co. lends Bio Foods $100,000 in exchange for a $100,000, 5-year note bearing interest at 8 percent annually. The market rate of interest for a note of similar risk is also 8 percent. a. How does Balance Bar record the receipt of the note? b. And how does Balance Bar record the receipt of interest at the end of the first year? c. At the end of the second year?4. On April 1, 2021, XYZ CO. issued a 9% interest bearing note with a face amount of P 30,000,000 for the purchase of a machine. The note is payable in five equal annual installments starting on March 31,2022. Interest is payable annually base on the remaining balance. There is no established cash price for the equipment. The prevailing market rate of interest for a note of this type is 12%. How much is the interest expense for the year 2022?On January 1, 2021, Oceanic Bank made a P1,000,000, 8% loan. The P80,000 interest is receivable at the end of each year, with the principal amount to be received at the end of five years. At the end of 2021, the first year's interest of P80,000 has not yet been received because the borrower is experiencing financial difficulties. The borrower negotiated a restructuring of the loan. The payment of all of the interest for 5 years will be delayed until the end of the 5- year loan term. In addition, the amount of principal repayment will be dropped from P1,000,000 to P500,000.The PV of 1 at 8% for 4 periods is .735. No interest revenue has been recognized in 2021 in connection with the loan. What is the loan impairment loss on December 31, 2021? a. 338,500 O b. 238,500 c. 388,000 O d. 288,000
- On April 1, 2021, XYZ. issued a 9% interest bearing note with a face amount of P 30,000,000 for the purchase of a machine. The note is payable in five equal annual installments starting on March 31,2022. Interest is payable annually base on the remaining balance. There is no established cash price for the equipment. The prevailing market rate of interest for a note of this type is 8%. What total amount should the notes payable, including accrued interest, be shown on December 31,2023 as part of the current liabilities in the statement of financial position?11. On January 1, 2011, Camry Company received a two-year P500,000 loan. The loan calls for interest payments to be made at the end of each year based on the prevailıng market rate at January 1 of each year. The interest rate at January 1, 2011 was 10%. Fortuner Company also has a two-year P500,000 loan but Fortuner's loan carries a fixed interest rate of 10%. Camry Company does not want to bear the risk that interest rates may increase in the second year of the loan. Fortuner Company believes that rates may decrease and it would prefer to have variable debt. So the two entities enter into an interest rate swap agreement whereby Fortuner agrees to make Camry's interest payment in 2012 and Camry likewise agrees to make Fortuner's interest payment in 2012. The two entities agree to make settlement payments, for the difference only, on December 31, 2012. If the interest rate on January 1, 2012 is 8%, what will be Camry's settlement with Fortuner? Using the information in MC 11, what…Birchcreek Construction has three payments left on a debt obligation in the amounts of $5,500, $10,250, and $8,000 due 1.5 years, 2 years, and 3.5 years from today. Prevailing interest rates are projected to be 8% compounded quarterly in the first year and 8.25% compounded semi-annually thereafter. If Birchcreek wants to settle the debt today, what amount should the creditor be willing to accept?