On June 30, 20X5, Adams Company had a $500,000, 7.4% fixed rate note due in 2 years.The note has been outstanding since May 26, 20X4 and the interest on the note is paid on June 30 and December 31 each year.The controller of Adams believed that interest rates would drop over the next two years, so he entered into a 2-year swap with Belmont National Bank to convert the fixed-rate note into a variable-rate note.According to the agreement, Adams Company will receive interest at a fixed rate of 7.4% and will pay a variable rate as determined by LIBOR.The LIBOR on June 30, 20X5 was 7.1%.The swap agreement calls for the variable rate to be reset each six months.The swap fair value on December 31, 20X5 was $6,300.
Required:
a.Present the journal entries, if any, to record the following events:
1.The entry to record the swap on June 30, 20X5.
2.The entries to record the semiannual interest payment on the debt and the settlement of the semiannual swap on December 31, 20X5.
3.The entries to record changes in fair value required by the above information on December 31, 20X5.
b.Present a partial balance sheet and income statement for the fiscal year ended December 31, 20X5 to include accounts affected by the above information.
Required:

a.Present the journal entries, if any, to record the following events:

Question

On June 30, 20X5, Adams Company had a $500,000, 7.4% fixed rate note due in 2 years.The note has been outstanding since May 26, 20X4 and the interest on the note is paid on June 30 and December 31 each year.The controller of Adams believed that interest rates would drop over the next two years, so he entered into a 2-year swap with Belmont National Bank to convert the fixed-rate note into a variable-rate note.According to the agreement, Adams Company will receive interest at a fixed rate of 7.4% and will pay a variable rate as determined by LIBOR.The LIBOR on June 30, 20X5 was 7.1%.The swap agreement calls for the variable rate to be reset each six months.The swap fair value on December 31, 20X5 was $6,300.
Required:
a.Present the journal entries, if any, to record the following events:
1.The entry to record the swap on June 30, 20X5.
2.The entries to record the semiannual interest payment on the debt and the settlement of the semiannual swap on December 31, 20X5.
3.The entries to record changes in fair value required by the above information on December 31, 20X5.
b.Present a partial balance sheet and income statement for the fiscal year ended December 31, 20X5 to include accounts affected by the above information.
Required:
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a.Present the journal entries, if any, to record the following events:
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Quizplus · Accepted Answer

The Answer of On June 30, 20X5, Adams Company had a $500,000, 7.4% fixed rate note due in 2 years.The note has been outstanding since May 26, 20X4 and the interest on the note is paid on June 30 and December 31 each year.The controller of Adams believed that interest rates would drop over the next two years, so he entered into a 2-year swap with Belmont National Bank to convert the fixed-rate note into a variable-rate note.According to the agreement, Adams Company will receive interest at a fixed rate of 7.4% and will pay a variable rate as determined by LIBOR.The LIBOR on June 30, 20X5 was 7.1%.The swap agreement calls for the variable rate to be reset each six months.The swap fair value on December 31, 20X5 was $6,300.
Required:
a.Present the journal entries, if any, to record the following events:
1.The entry to record the swap on June 30, 20X5.
2.The entries to record the semiannual interest payment on the debt and the settlement of the semiannual swap on December 31, 20X5.
3.The entries to record changes in fair value required by the above information on December 31, 20X5.
b.Present a partial balance sheet and income statement for the fiscal year ended December 31, 20X5 to include accounts affected by the above information.
Required:
​
a.Present the journal entries, if any, to record the following events:
​
​
​

On June 30, 20X5, Adams Company Had a $500,000, 7