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On January 2, 2020, Ivanhoe Corp. issued a $108,000, four-year note at prime plus 1% variable interest, with interest payable semi-annually. On the same date,
On January 2, 2020, Ivanhoe Corp. issued a $108,000, four-year note at prime plus 1% variable interest, with interest payable semi-annually. On the same date, Ivanhoe entered into an interest rate swap where it agreed to pay 8% fixed and receive prime plus 1% for the first six months on $108,000. At each six-month period, the variable rate will be reset. The prime interest rate is 7.6% on January 2, 2020, and is reset to 8.5% on June 30, 2020. On December 31, 2020, the fair value of the swap has increased by $25,000. Ivanhoe follows ASPE and uses hedge accounting. Assume that the swap qualifies for hedge accounting under ASPE. Calculate the net interest expense to be reported for this note and the related swap transaction as at June 30 and December 31, 2020 June 30 December 31 $ $ The net interest expense to be reported Prepare the journal entries relating to the interest for the year ended December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry"for the account titles and entero for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record payment of interest.) (To record cash received on swap.) (To record payment of interest.) (To record cash received on swap.) Assume, instead, that Ivanhoe follows IFRS. Prepare the journal entries for this cash flow hedge. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Account Titles and Explanation Debit Credit Date December 31, 2020 (To increase the value of the contract.) December 31, 2020 (To record the "fix" under hedge accounting.)
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