On January 1, 2021, Labtech Circuits borrowed $210,000 from First Bark byssuing a three year 9 note payable on December 31 2023 Labtech wanted to hedge the risk that general interest rates will decline.cousing the fair value of its debt to increase. Therefore, Labtech entered into a three year interest rate swap agreement on January 1, 2021 and designated the swap as a fair value hedge The agreement called for the company to receive payment based on an 9 foed Interest rate om o notional amount of $210,000 and to pay interest based on a floating interest rate tied to LIBOR. The contract called for cash settlement of the net interest amount on December 31 of each year Floating (LIBOR settlementiates were 96 otinception and 108 and 85 at the end of 2021 2022 and 2023. respectively. The fair values of the swap are quotes obtained front derivatives dealer These guotes and the far values of the pote are as follows: ay 1 December 31 2023 Fair Vior of terest rate swap Fair value of the 2021 $59) $207,141 $10.00 5 2,035 5212,035 $210.000 Required: 1. Calculate the cash settement at the end of 2021 2022 2023 2. Prepare the journal entre during 202110 acordance of the note,terest, and necessary agus ments for changes in fair value 3. Prepare the journal entries during 2022 to record interdit het conterest contentent for the interest te swap, ond necessary adjustments for changes in fair valde 4. Prepare the journal entries during 2023 to record net casi interessentement for the interest rate swap necessary ndustments for changes in air volue and repayment of the 5. Calculate the book values of both the wapecount and the note in each of the three years 6. Calculate the net effect on earnings of the hedging orangement in each of the three years ignore income taxes.) 7. Suppose the for value of the note of December 31, 2024 ad been $206.000 rather than $207 with the additional decline in four vale due to investors perceptions that the creditworthiness of Labtech was worsening How would that affect your entries to record changes in the love? Complete this question by entering your answers in the tabs below. Regleda irata Required Required Red Prepare the journal entries during 2022 to record interest, net cash Interest Settlement for the interest rate swap, and necessary auments for changes in fale valuf no entry is required for transaction/event, select "No journal entry required in the first PE Journal entry worksheet On January 1, 2021, Labtech Circuits borrowed $210,000 from First Bark byssuing a three year 9 note payable on December 31 2023 Labtech wanted to hedge the risk that general interest rates will decline.cousing the fair value of its debt to increase. Therefore, Labtech entered into a three year interest rate swap agreement on January 1, 2021 and designated the swap as a fair value hedge The agreement called for the company to receive payment based on an 9 foed Interest rate om o notional amount of $210,000 and to pay interest based on a floating interest rate tied to LIBOR. The contract called for cash settlement of the net interest amount on December 31 of each year Floating (LIBOR settlementiates were 96 otinception and 108 and 85 at the end of 2021 2022 and 2023. respectively. The fair values of the swap are quotes obtained front derivatives dealer These guotes and the far values of the pote are as follows: ay 1 December 31 2023 Fair Vior of terest rate swap Fair value of the 2021 $59) $207,141 $10.00 5 2,035 5212,035 $210.000 Required: 1. Calculate the cash settement at the end of 2021 2022 2023 2. Prepare the journal entre during 202110 acordance of the note,terest, and necessary agus ments for changes in fair value 3. Prepare the journal entries during 2022 to record interdit het conterest contentent for the interest te swap, ond necessary adjustments for changes in fair valde 4. Prepare the journal entries during 2023 to record net casi interessentement for the interest rate swap necessary ndustments for changes in air volue and repayment of the 5. Calculate the book values of both the wapecount and the note in each of the three years 6. Calculate the net effect on earnings of the hedging orangement in each of the three years ignore income taxes.) 7. Suppose the for value of the note of December 31, 2024 ad been $206.000 rather than $207 with the additional decline in four vale due to investors perceptions that the creditworthiness of Labtech was worsening How would that affect your entries to record changes in the love? Complete this question by entering your answers in the tabs below. Regleda irata Required Required Red Prepare the journal entries during 2022 to record interest, net cash Interest Settlement for the interest rate swap, and necessary auments for changes in fale valuf no entry is required for transaction/event, select "No journal entry required in the first PE Journal entry worksheet
