Chapter 1 Problem 14-6
2008
Jan. 1 Cash 3,000,000
Loan payable 3,000,000
Dec. 31 Interest expense 240,000
Cash (8% x 3,000,000) 240,000
31 Interest rate swap receivable 97,200
Unrealized gain – interest rate swap (30,000 x 3.24) 97,200
Batangas Company will receive P30,000 at the end of
2009 and can expect to receive P30,000 at the end of
2010, 2011 and 2012. Thus, the present value of the four
annual payments of P30,000 is recognized on December 31,
2008 as interest rate swap receivable.
2009
Dec. 31 Interest expense 270,000
Cash (9% x 3,000,000) 270,000
31 Cash 30,000
Interest rate swap receivable 30,000
31 Unrealized gain – interest rate swap 30,000
Interest expense 30,000
31 Unrealized gain – interest rate swap 67,200
Interest rate swap receivable (97,200 – 30,000) 67,200
31 Unrealized loss – interest rate swap 160,200
Interest rate swap payable (60,000 x 2.67) 160,200
Batangas Company will make a payment of P60,000 at
The end of 2010 by reason of the reduced interest rate and can expect to make payment of P60,000 at the end
of 2011 and 2012. Thus, the present value of the three
annual payments of P60,000 is recognized on December 31,
2009 as the interest rate swap payable.
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