On January 1, 2018, Company X is holding $10,000,000, 5% fixed-rate debt which matures in 4 years. To hedge this debt, Company X enters into a 4-year interest rate swap to receive 5% and pay LIBOR on a notional of $10,000,000. Settlement and rate reset is each December 31. The following information is available: DATE LIBOR FMV of Swap Jan. 1, 2018 5% Dec. 31, 2018 4.7% $81,450 Dec. 31, 2019 5.8% ($147,300) In an orderly manner, prepare the appropriate entries for the interest payment, swap settlement (if applicable) and necessary adjustments for 2018 and 2019.

On January 1, 2018, Company X is holding $10,000,000, 5% fixed-rate debt which matures in 4 years. To hedge this debt, Company X enters into a 4-year interest rate swap to receive 5% and pay LIBOR on a notional of $10,000,000. Settlement and rate reset is each December 31. The following information is available: DATE LIBOR FMV of Swap Jan. 1, 2018 5% Dec. 31, 2018 4.7% $81,450 Dec. 31, 2019 5.8% ($147,300) In an orderly manner, prepare the appropriate entries for the interest payment, swap settlement (if applicable) and necessary adjustments for 2018 and 2019.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 16E

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