On July 1, 2016, Molson Coors Brewing Company borrowed \($3\) million for two years with interest paid semi-annually based on LIBOR adjusted semiannually. On that date, LIBOR is 2 percent per annum. To hedge against a possible rise in interest rates, on July 2 Molson Coors bought a two-year 2.05 percent interest rate cap for 0.075 percent per year, payable in full immediately. The intrinsic value of the cap is designated as the hedge instrument and the hedge is fully effective. LIBOR increased during the second half of 2016 and is reset to 2.15 percent for the first half of 2017. Molson Coors closes its books on December 31 and June 30. The cap's fair value is \($3,500\) on December 31, 2016, before the rate adjustment, and is \($4,000\) on June 30, 2017, when the time value component is \($2,500. \)

Required 

Prepare all journal entries related to the loan interest and the interest rate cap on July 2, 2016, December 31, 2016, and June 30, 2017.