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Exercise A-9 (Algo) Derivatives; cash flow hedge; interest rate swap; shortcut method (LOA-3] Kipped On January 1, 2021, JPS Industries borrowed $320,000 from Austin Bank by issuing a three-year, floating rate note based on LIBOR, with interest payable semi-annually on June 30 and December of each year. JPS entered into a three-year interest rate swap agreement on January 1, 2021, and designated the swap as a cash flow hedge. The intent was to hedge the risk that interest rates will rise, increasing its semi-annual interest payments. The swap agreement called for the company to receive payment based on a floating interest rate on a notional amount of $320,000 and to pay a 4.0% fixed interest rate. The contract called for cash settlement of the net interest amount semi-annually, and the rate on each reset date (June 30 and December 31) determines the variable interest rate for the following six months. Book LIBOR rates in 2021 were 4.0% at January 1, 3.0% at June 30, and 5.0% at December 31. The fair values of the swap on those dates, obtained by dealer quotes, were as follows: Ask Swap fair value January 1 $ June 30 December 31 $(3,500) $ 4,400 Print Required: 1. Calculate the net settlement on June 30, 2021. 2. Prepare journal entries for the period January 1 to December 31, 2021, to record the note payable and hedging instrument, necessary adjustments for changes in fair value, and settlement of the swap contract. erences Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the net settlement on June 30, 2021. (Round your intermediate and final answer to the nearest whole dollar.) June 30 Net cash settlement Required 1 Required 2 Prepare journal entries for the period January 1 to December 31, 2021, to record the note payable and hedging instrument, necessary adjustments for changes in fair value, and settlement of the swap contract. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to the nearest whole dollar.) Show less View transaction list Journal entry worksheet Journal entry worksheet