Exercise A-2 (Algo) Derivatives; interest rate swap; fixed rate debt [LOA-2] On January 1, 2021, LLB Industries borrowed $330,000 from Trust Bank by issuing a two-year, 12% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to receive payment based on a 12% fixed interest rate on a notional amount of $330,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 12% at January 1, 10% at March 31, and 8% June 30, 2021. The fair values of the swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as indicated below. Fair value of interest rate swap Fair value of note payable January 1 March 31 0 $ 7,772 $330,000 $337, 772 June 30 $ 13,994 $343,994 Required: 1. Calculate the net cash settlement at March 31 and June 30, 2021. 2. Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value. mplete this question teri your wers in the tabs below. Required 1 Required 2 Calculate the net cash settlement at March 31 and June 30, 2021. March 31 June 30 $ 1,650 $ 3,300 Net cash settlement Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 2 3 4 5 6 7 8 9 > ES Record the interest. Note: Enter debits before credits. Date General Journal Debit Credit March 31 Record entry Clear entry View general journal Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 3 4 5 6 7 8 9 > ES Record the net cash settlement. Note: Enter debits before credits. Date General Journal Debit Credit March 31 Record entry Clear entry View general journal Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 4 5 6 7 8 9 > ES Record the change in fair value of the derivative. Note: Enter debits before credits. Date General Journal Debit Credit March 31 Record entry Clear entry View general journal Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 3 4 5 6 7 8 9 > ES Record the change in fair value of the note. Note: Enter debits before credits. Date General Journal Debit Credit March 31 Record entry Clear entry View general journal Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 3 4 5 6 7 8 9 > ES Record the interest. Note: Enter debits before credits. General Journal Debit Credit Date June 30 Record entry Clear entry View general journal Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 3 4 5 6 7 8 9 > ES Record the net cash settlement. Note: Enter debits before credits. General Journal Debit Credit Date June 30 Record entry Clear entry View general journal Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 3 4 5 6 7 8 9 > ES Record the change in fair value of the derivative. Note: Enter debits before credits. General Journal Debit Credit Date June 30 Record entry Clear entry View general journal Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 3 4 5 6 7 8 9 ES Record the change in fair value of the note. Note: Enter debits before credits. General Journal Debit Credit Date June 30 Record entry Clear entry View general journal