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(3) Prepare the journal entries required for the swap at the ends of 2019 and 2020. Problem 4 (20%) Newman Corp. issued a $5 million,
(3) Prepare the journal entries required for the swap at the ends of 2019 and 2020. Problem 4 (20%) Newman Corp. issued a $5 million, 6-year note on January 2, 2019. Interest was to be paid annually and based on LIBOR (London Interbank Offered Rate). Newman was worried that if LIBOR unexpectedly rose substantially, the company might not be able to pay interest on the note in full. To hedge against the cash flow uncertainty, Newman entered into an interest rate swap to pay 5% fixed and receive LIBOR based on $5 million for the term of the note. The (2) Calculate the net interest expense to be reported for this note and related swap transactions as at December 31, 2019 and 2020. (3) Prepare the journal entries required for the swap at the ends of 2019 and 2020. Problem 4 (20%) Newman Corp. issued a $5 million, 6-year note on January 2, 2019. Interest was to be paid annually and based on LIBOR (London Interbank Offered Rate). Newman was worried that if LIBOR unexpectedly rose substantially, the company might not be able to pay interest on the note in full. To hedge against the cash flow uncertainty, Newman entered into an interest rate swap to pay 5% fixed and receive LIBOR based on $5 million for the term of the note. The (2) Calculate the net interest expense to be reported for this note and related swap transactions as at December 31, 2019 and 2020
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