Solved

On July 1, 20X1, Littleton Inc Required:
?
Prepare All Entries to Record This Hedge Through

Question 58

Essay

On July 1, 20X1, Littleton Inc.loaned a key supplier of raw material $2,000,000 to construct a new processing facility.The loan is due on July 1, 20X3 and pays interest each December 31 and June 30.The supplier insisted on a variable rate loan.Charles Upton, controller of Littleton Inc., wants to avoid the risk of variable interest rate fluctuations.As a result, Littleton Inc.entered into an interest rate swap in which it will pay the variable rate on $2,000,000 in exchange for a fixed interest rate of 8.3%.The swap is settled on the interest payment dates.Variable interest rates and the value of the swap on selected dates are as follows:
?
?
 Variable  Interest  Value of  Rate  the Swap  July 1,20X17.90% December 31,20X17.75%$10,400\begin{array}{lll}&\text { Variable } \\&\text { Interest }&\text { Value of } \\&\text { Rate }&\text { the Swap }\\\text { July } 1,20 \mathrm{X} 1 & 7.90 \% & \\\text { December } 31,20 \mathrm{X} 1 & 7.75 \% & \$ 10,400\end{array}

Required:
?
Prepare all entries to record this hedge through December 31, 20X1.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents