AC 302 Chapter 17 Question 23

AC 302 Chapter 17 Question 23
Name				Date		
Instructor				Course		
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
E17-23 (Fair Value Hedge) On January 2, 2012, MacCloud Co. issued a						4 
-year,	$100,000 	note at	6.00%	fixed interest, interest payable 		
semiannually. MacCloud now wants to change the note to a variable-rate note.						
As a result, on January 2, 2012, MacCloud Co. enters into an interest rate swap where it agrees to 						
receive	6.00%	fixed and pay LIBOR of		5.70%	for the first 6 months on	
$100,000 	At each 6-month period, the variable rate will be reset. The variable rate is reset to					
6.70%	on June 30, 2012.					
						
Instructions:						
(a) Compute the net interest expense to be reported for this note and related swap transaction as of June 30, 2012.						
						
(b) Compute the net interest expense to be reported for this note and related swap transaction as of December 31, 2012.						
						
						
				(a) 06/30/12	(b) 12/31/12	
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