On January 1, 2020, Macro Ltd. issues a floating rate bonds for $ 500,000 with semi-annual interest payments. At the same time, the corporation enters into an interest rate swap whereby it agrees to pay interest on $ 500,000 at 10% (the current interest rate) and to receive payments based on the floating rate (Macro will receive or pay the difference). Macro designate the interest rate swap as a cash flow hedge. On June 30, 2020, the floating interest rate is 12%, and the value of the swap contract is $ 7,000 to the Macros benefit. On December 31, 2020, the floating interest rate is 8%, and the value of the swap contract is $ 2,000 to the counterparts benefit.

a) Prepare necessary journal entry related to the swap agreement on January 1, 2020.

b) Determine the interest on the bonds and cash payment or receipt on the swap (indicate clearly whether it is payment of receipt for Macro), and net interest expense for Macro on June 30, 2020.

c) Prepare all journal entries required related to the swap agreement and the interest payment on the bonds on June 30, 2020.

d) Determine the interest on the bonds and cash payment or receipt on the swap (indicate clearly whether it is payment of receipt for Macro) and net interest expense for Macro on December 31, 2020.

e) Prepare all journal entries required related to the swap agreement and the interest payment on the bonds on December 31, 2020.