Cullumber Corp. issued a $2million, fouryear, 7.65% fixed-rate interest only, non-prepayable bond on December 31, 2019. Cullumber later decided to hedge the interest rate and change from a fixed rate to variable rate, so it entered into a swap agreement with M&S Corp. The swap agreement specified that Cullumber will receive a fixed rate of 7.65% and pay variable rate interest with settlement dates that match the interest payments on the instrument. Assume that interest rates declined during 2020 and that Cullumber received $12,600 as a net settlement on the swap for the settlement at December 31, 2020. The loss related to the debt (due to interest rate changes) was $46,500. The value of the swap contract increased by $46,500. The company follows IFRS. Assume criteria for hedge accounting are met and that the company has chosen to use hedge accounting.

Prepare the journal entry to record the payment of interest on December 31, 2020.

Date Account Titles and Explanation Debit Credit December 31, 2020