On December 31, 2022, Sundry Corp. had a 10M, 8% fixed-rate note outstanding, payable in 2 years. It enters into a 2-year swap to convert the fixed-rate debt to a variable-rate debt. Under the agreement, Sundry will receive interest at a fixed 8% rate and pay a variable rate equal to the 6-month LIBOR rate based on a notional amount of $10M. The LIBOR rate was 7% on December 31, 2022. The LIBOR rate will be reset every six months and will be used to determine the variable rate to be paid for the following 6-month period.

(a) Prepare the journal entry to record settlement of the swap on June 30, 2023