On January 1, 2021, LLB Industries borrowed $400,000 from Trust Bank by issuing a two-year, 8% 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 intentwas to hedge the risk that general interest rates will decline, causing iPhone USB ue of its debt to increase. The agreement called for thecompany to receive payment based on a 8% fixed interest rate on a notional amount of $400,000 and to pay interest based on afloating interest rate. The contract called for cash settlement of the net interest amount quarterly.Floating (LIBOR) settlement rates were 8% at January 1, 6% at March 31, and 4% June 30, 2021. The fair values of the swap are quotesobtained from a derivatives dealer. Those quotes and the fair values of the note are as indicated below.Fair value of interest rate swapFair value of note payableJanuary 10$400,000Required:1. Calculate the net cash settlement at March 31 and June 30, 2021.2. Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments forchanges in fair value.Complete this question by entering your answers in the tabs below.Net cash settlementMarch 311$ 8,472$408,472Required 1 Required 2Calculate the net cash settlement at March 31 and June 30, 2021.March 31June 30June 30$ 15,394$415,394Help Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changesin fair value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)View transaction listJournal entry worksheet2 3Record the issuance of the note.Note: Enter debits before credits.DateJanuary 01Record entry5General JournalClear entry67BARN8DebitPent9CreditView general journal#Navt

Notes Payable: - Notes payable refers to a loan from a bank or any other financial institution…

On January 1, 2021, LLB Industries borrowed $400,000 from Trust Bank by issuing a two-year, 8% 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 iPhone USB ue of its debt to increase. The agreement called for the company to receive payment based on a 8% fixed interest rate on a notional amount of $400,000 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 8% at January 1, 6% at March 31, and 4% 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 indicated below. Fair value of interest rate swap Fair value of note payable January 11 0 $400,000 March 31 $ 8,472 $408,472 June 30 $ 15,394 9415,394 Required: 1. Calculate the net cash settlement at March 31 and June 30, 2021. 2. Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value.

On January 1, 2021, LLB Industries borrowed $400,000 from Trust Bank by issuing a two-year, 8% 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 iPhone USB ue of its debt to increase. The agreement called for the company to receive payment based on a 8% fixed interest rate on a notional amount of $400,000 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 8% at January 1, 6% at March 31, and 4% 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 indicated below. Fair value of interest rate swap Fair value of note payable January 11 0 $400,000 March 31 $ 8,472 $408,472 June 30 $ 15,394 9415,394 Required: 1. Calculate the net cash settlement at March 31 and June 30, 2021. 2. Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter13: Marketable Securities And Derivatives

Section: Chapter Questions

Problem 30P

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