Chapter 1 Problem 14-4
Requirement 1
2008
Jan. 1 Cash 4,000,000
Loan payable 4,000,000
Dec. 31 Interest expense 480,000
Cash (12% x 4,000,000) 480,000
31 Interest rate swap receivable 70,160
Unrealized gain – interest rate swap (80,000 x .877) 70,160
2009
Dec. 31 Interest expense 560,000
Cash (14% x 4,000,000) 560,000
31 Cash 80,000
Interest rate swap receivable 70,160
Unrealized gain – interest rate swap 9,840
31 Loan payable 4,000,000
Cash 4,000,000
31 Unrealized gain – interest rate swap 80,000
Interest expense 80,000
Requirement 2
2008
Jan. 1 Cash 4,000,000
Loan payable 4,000,000
2008
Dec. 31 Interest expense 480,000
Cash 480,000
31 Unrealized loss – interest rate swap 36,040
Interest rate swap payable (40,000 x .901) 36,040
2009
Dec. 31 Interest expense 440,000
Cash (11% x 4,000,000) 440,000
31 Interest rate swap payable 36,040
Unrealized loss - Interest rate swap 3,960
Cash 40,000
31 Loan payable 4,000,000
Cash 4,000,000
31 Interest expense 40,000
Unrealized loss - interest rate swap 40,000
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