Required information On January 1, 2024, Avalanche Corporation borrowed $134,000 from First Bank by issuing a two-year, 8% fixed-rate note with annual interest payments. The principat of the note is due on December 31,2025. - Avalanche wanted to hedge against declines in general interest rates, 50 it also entered into a two-year SOFR-based interest rate swap agreement on January 1,2024, and designates it as a fair value hedge. Because the swap is. entered at market rates, the fair value of the swap is zero at inception, .. The agreement called for the company to receive fixed interest at the current SOFR swap rate of 5% and pay floating interest tied to SOFR. This arrangement results in an effective variable rate on the note of SOFR +3%. - The contract specifies that the floating rate resets each year on June 30 and December 31 for the net settlement that is due the following period. In other words, the net cash settiement is calculated using beginning-of-period rates. The SOFR rates on the swap reset dates and the fair values of the swap obtained from a derivatives dealer are as follows: Avalanche meets bill criteria for hedge occounting using the shortcut method. 7. Calculate the net effect on earnings of the hedging arrangement foc the six-month periods ending June 30 and December 3t, 2024 , ind June 30 and December 31,2025 . Note: Indicate negative amounts with a minus sign