Cash Flow Hedge: Interest Rate Swap On January 1, 2023, Greentree Foods borrowed $5 million of variable rate debt at an annual rate equal to the Treasury bill rate plus 80 bp, interest paid semiannually on June 30 and December 31 of each year. The variable rate is reset every six months. To hedge against increasing interest rates, Greentree entered a receive variable/pay fixed interest rate swap, agreeing to pay a 2.5 percent fixed rate on a notional amount of $5 million. The present value of the expected future net swap payments was $25,000. The treasury bill rate was 2 percent on January 1, 2023. On June 30, the treasury bill rate is 2.4 percent and the swap has a fair value of $22,500. On December 31, 2023, the treasury bill rate is 2.5 percent and the swap has a fair value of $6,000. Required Prepare the journal entries to record the events for the year 2023.

1/1/23

To record the variable rate loan.

To record the swap agreement.

6/30/23

To record the interest payment on the loan.

To record the net cash inflow on the swap.

To adjust interest expense to the actual rate paid.

To revalue the swap to its new present value.

12/31/23

To record the interest payment on the loan.

To record the net cash inflow on the swap.

To adjust interest expense to the actual rate paid.

To revalue the swap to its new present value.