Exercise A-2 (Algo) Derivatives; interest rate swap; fixed rate debt (LOA-2] On January 1, 2021, LLB Industries borrowed $230,000 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 $230,000 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. Fair value of interest rate swap Fair value of note payable January 1 0 $230,000 March 31 $ 6,772 $236,772 June 30 $ 11,994 $241,994 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. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the net cash settlement at March 31 and June 30, 2021. March June 30 31 $ 4,570 X $ 3,450 X Net cash settlement Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Date General Journal Debit Credit 1 January 01 Cash 230,000 Notes payable 230,000 2 March 31 6,900 X Interest expense Cash 6,900 3 March 31 Cash 3,450 X Interest expense 3,450 X 4 March 31 Interest rate swap 6,772 Interest revenue 6,772 5 March 31 6,772 Interest expense Notes payable 6,772 6 June 30 6,900 X Interest expense Cash 6,900 X 7 June 30 2,300 Cash Interest expense 2,300 8 June 30 5,222 Interest rate swap Interest revenue 5,222 9 June 30 13,228 X Interest expense Notes payable oo 13,228 X Required 1 Required 2