Derivatives : Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options. Interest rate swap : This is a type of derivative used by two parties under a contract to exchange the consequences (net cash difference between interest payments) of fixed interest rate for floating interest rate, or vice versa, without exchanging the principal or notional amounts. The net cash settlement as at December 31, 2016, 2017, and 2018

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Answer 1

Question

Chapter A, Problem A.1P

(1)

To determine

Derivatives: Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options.

Interest rate swap: This is a type of derivative used by two parties under a contract to exchange the consequences (net cash difference between interest payments) of fixed interest rate for floating interest rate, or vice versa, without exchanging the principal or notional amounts.

The net cash settlement as at December 31, 2016, 2017, and 2018

(2)

To determine

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016

(3)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2017

(4)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2018.

(5)

To determine

The book values of interest rate swap and note in 2016, 2017, and 2018.

(6)

To determine

The net effect of fair value hedge on earnings for the years 2016, 2017, and 2018.

(7)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016, if fair value would have been $97,000 rather than $98,241.

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Answer 2

Question

Chapter A, Problem A.1P

(1)

To determine

Derivatives: Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options.

Interest rate swap: This is a type of derivative used by two parties under a contract to exchange the consequences (net cash difference between interest payments) of fixed interest rate for floating interest rate, or vice versa, without exchanging the principal or notional amounts.

The net cash settlement as at December 31, 2016, 2017, and 2018

(2)

To determine

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016

(3)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2017

(4)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2018.

(5)

To determine

The book values of interest rate swap and note in 2016, 2017, and 2018.

(6)

To determine

The net effect of fair value hedge on earnings for the years 2016, 2017, and 2018.

(7)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016, if fair value would have been $97,000 rather than $98,241.

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Answer 3

Question

Chapter A, Problem A.1P

(1)

To determine

Derivatives: Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options.

Interest rate swap: This is a type of derivative used by two parties under a contract to exchange the consequences (net cash difference between interest payments) of fixed interest rate for floating interest rate, or vice versa, without exchanging the principal or notional amounts.

The net cash settlement as at December 31, 2016, 2017, and 2018

(2)

To determine

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016

(3)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2017

(4)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2018.

(5)

To determine

The book values of interest rate swap and note in 2016, 2017, and 2018.

(6)

To determine

The net effect of fair value hedge on earnings for the years 2016, 2017, and 2018.

(7)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016, if fair value would have been $97,000 rather than $98,241.

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Answer 4

Question

Chapter A, Problem A.1P

(1)

To determine

Derivatives: Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options.

Interest rate swap: This is a type of derivative used by two parties under a contract to exchange the consequences (net cash difference between interest payments) of fixed interest rate for floating interest rate, or vice versa, without exchanging the principal or notional amounts.

The net cash settlement as at December 31, 2016, 2017, and 2018

(2)

To determine

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016

(3)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2017

(4)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2018.

(5)

To determine

The book values of interest rate swap and note in 2016, 2017, and 2018.

(6)

To determine

The net effect of fair value hedge on earnings for the years 2016, 2017, and 2018.

(7)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016, if fair value would have been $97,000 rather than $98,241.

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Answer 5

Chapter A, Problem A.1P

(1)

To determine

Derivatives: Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options.

Interest rate swap: This is a type of derivative used by two parties under a contract to exchange the consequences (net cash difference between interest payments) of fixed interest rate for floating interest rate, or vice versa, without exchanging the principal or notional amounts.

The net cash settlement as at December 31, 2016, 2017, and 2018

(2)

To determine

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016

(3)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2017

(4)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2018.

(5)

To determine

The book values of interest rate swap and note in 2016, 2017, and 2018.

(6)

To determine

The net effect of fair value hedge on earnings for the years 2016, 2017, and 2018.

(7)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016, if fair value would have been $97,000 rather than $98,241.

Answer 6

Chapter A, Problem A.1P

(1)

To determine

Derivatives: Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options.

Interest rate swap: This is a type of derivative used by two parties under a contract to exchange the consequences (net cash difference between interest payments) of fixed interest rate for floating interest rate, or vice versa, without exchanging the principal or notional amounts.

The net cash settlement as at December 31, 2016, 2017, and 2018

Answer 7

Chapter A, Problem A.1P

(1)

To determine

Derivatives: Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options.

Interest rate swap: This is a type of derivative used by two parties under a contract to exchange the consequences (net cash difference between interest payments) of fixed interest rate for floating interest rate, or vice versa, without exchanging the principal or notional amounts.

The net cash settlement as at December 31, 2016, 2017, and 2018

Answer 8

(2)

To determine

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016

Answer 9

(2)

To determine

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016

Answer 10

(3)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2017

Answer 11

(3)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2017

Answer 12

(4)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2018.

Answer 13

(4)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2018.

Answer 14

(5)

To determine

The book values of interest rate swap and note in 2016, 2017, and 2018.

Answer 15

(5)

To determine

The book values of interest rate swap and note in 2016, 2017, and 2018.

Answer 16

(6)

To determine

The net effect of fair value hedge on earnings for the years 2016, 2017, and 2018.

Answer 17

(6)

To determine

The net effect of fair value hedge on earnings for the years 2016, 2017, and 2018.

Answer 18

(7)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016, if fair value would have been $97,000 rather than $98,241.

Answer 19

(7)

To determine

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016, if fair value would have been $97,000 rather than $98,241.

Answer 20

Expert Solution & Answer

Answer 21

Expert Solution & Answer

Answer 22

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Answer 23

Ch. A - Prob. A.1Q Ch. A - Prob. A.2Q Ch. A - Prob. A.3Q Ch. A - Prob. A.4Q Ch. A - Prob. A.5Q Ch. A - Prob. A.6Q Ch. A - Prob. A.7Q Ch. A - Prob. A.1E Ch. A - Prob. A.2E Ch. A - Prob. A.3E

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2017

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2018.

The book values of interest rate swap and note in 2016, 2017, and 2018.

The net effect of fair value hedge on earnings for the years 2016, 2017, and 2018.

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value during 2016, if fair value would have been $97,000 rather than $98,241.

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Chapter A Solutions