Chapter 1 Problem 14-8
2008
Jan. 1 Cash 5,000,000
Loan payable 5,000,000
Dec. 31 Interest expense (5,000,000 x 8%) 400,000
Cash 400,000
31 Interest swap receivable 249,000
Unrealized gain – interest rate swap 249,000
(5,000,000 x 2% x 2.49)
2009
Dec. 31 Interest expense (5,000,000 x 10%) 500,000
Cash 500,000
31 Cash 100,000
Interest rate swap receivable 100,000
31 Unrealized gain – interest rate swap 100,000
Interest expense 100,000
31 Interest rate swap receivable 107,500
Unrealized gain – interest rate swap 107,500
(5,000,000 x 2% x 2.49)
Unrealized gain – 12/31/2009 (5,000,000 x 3% x 1.71) 256,500
Unrealized gain per book (249,000 – 100,000) 149,000
Increase in unrealized gain 107,500
2010
Dec. 31 Interest expense (5,000,000 x 11%) 550,000
Cash 550,000
31 Cash 150,000
Interest swap receivable 150,000
31 Unrealized gain – interest rate swap 150,000
Interest expense 150,000
31 Interest rate swap receivable 71,500
Unrealized gain – interest rate swap 71,500
Unrealized gain – 12/31/2010 (5,000,000 x 4% x .89) 178,000
Unrealized gain per book (256,500 – 150,000) 106,500
Increase in unrealized gain 71,500
2011
Dec. 31 Interest expense (5,000,000 x 12%) 600,000
Cash 600,000
31 Cash 200,000
Interest rate swap receivable 178,000
Unrealized gain – interest swap 22,000
31 Unrealized gain – interest swap 200,000
Interest expense 200,000
31 Loan payable 5,000,000
Cash 5,000,000
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