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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 swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as follows: fair value of interest rate swap Fair value of note payable View transaction Sist Required: Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes In fair value (Round your intermediate and final answers to the nearest whole dollar. If no entry is required for a transaction/event. select "No journal entry required" in the first account field.) No 1 View journal entry worksheet Date January 01 January 1 e $ 200,000 $206,472 March 31 $ 6,472 Cash Notes payable June 30 $ 11,394 $ 211,394 General Journal Debit 200,000 Credit 200.000

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 swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as follows: fair value of interest rate swap Fair value of note payable View transaction Sist Required: Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes In fair value (Round your intermediate and final answers to the nearest whole dollar. If no entry is required for a transaction/event. select "No journal entry required" in the first account field.) No 1 View journal entry worksheet Date January 01 January 1 e $ 200,000 $206,472 March 31 $ 6,472 Cash Notes payable June 30 $ 11,394 $ 211,394 General Journal Debit 200,000 Credit 200.000

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter7: Financial Activities
Section: Chapter Questions
Problem 23PC
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Does 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 swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as follows: Fair value of interest rate swap Fair value of note payable View transaction list View journal entry worksheet Date January 01 N Required: Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes In fair value (Round your intermediate and final answers to the nearest whole dollar. If no entry is required for a transaction/event, select "No journal entry required in the first account field.) 7 No 1 2 3 4 5 March 31 March 31 March 31 June 30 June 30 Cash Notes payable Interest expense Cash Cash Interest expense January 11 e $ 200,000 Interest rate swap interest rate swap Interest expense Cash March 31 $ 6,472 $206,472 June 30 $ 11,394 $ 211,394 General Journal Debit 200,000 5,000 1,000 6,472 5,000 Credit 200,000 5,000 1,000 6,472 5,000 Ⓒ
Transcribed Image Text:Does 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 swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as follows: Fair value of interest rate swap Fair value of note payable View transaction list View journal entry worksheet Date January 01 N Required: Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes In fair value (Round your intermediate and final answers to the nearest whole dollar. If no entry is required for a transaction/event, select "No journal entry required in the first account field.) 7 No 1 2 3 4 5 March 31 March 31 March 31 June 30 June 30 Cash Notes payable Interest expense Cash Cash Interest expense January 11 e $ 200,000 Interest rate swap interest rate swap Interest expense Cash March 31 $ 6,472 $206,472 June 30 $ 11,394 $ 211,394 General Journal Debit 200,000 5,000 1,000 6,472 5,000 Credit 200,000 5,000 1,000 6,472 5,000 Ⓒ
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