Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cash Flow Hedge: Interest Rate Swap Organic Farms has a $10,000,000 loan with a variable interest rate, due December 31, 2024. The interest rate is

Cash Flow Hedge: Interest Rate Swap Organic Farms has a $10,000,000 loan with a variable interest rate, due December 31, 2024. The interest rate is set at the beginning of each year and interest is paid at year-end. On January 1, 2023, when the variable rate is 3%, Organic Farms enters a swap agreement whereby it pays a fixed rate of 3.2% and receives the variable rate required to pay interest on the loan. On December 31, 2023, the variable rate is reset to 3.1%. Required Prepare journal entries to record the swap liability at January 1, 2023, and all entries required at December 31, 2023 and 2024. Organic Farms records the swap liability at the present value of future expected payments, discounted at the variable rate.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Guide To Financial Audit In Life And Health Insurance

Authors: Naser-Eddine Nebbache

1st Edition

6205873397, 978-6205873397

More Books

Students also viewed these Accounting questions

Question

Graph each ellipse. x2 l 9 ye 16 = 1

Answered: 1 week ago