On January 1, 2021, LLB Industries borrowed $370,000 from Trust Bank by issuing a two-year, 8% 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 8% fixed interest rate on a notional amount of $370,000 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 8% at January 1, 6% at March 31, and 4% 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. January 1 Fair value of interest rate swap Fair value of note payable March 31 $ 8,172 $ 378,172 June 30 $ 14,794 $ 384,794 $ 370,000 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. General Journal Credit No 1 Date January 01 Debit 370,000 Cash Notes payable 370,000 2 March 31 1,850 Interest expense Cash 1,850 3 March 31 Cash Interest expense 4 March 31 Interest rate swap 5 March 31 Interest expense Notes payable 6 June 30 Interest expense Cash >> 7 June 30 Cash Interest expense 8 June 30 Interest rate swap 9 June 30 Notes payable