AC 302 Chapter 17 Question 25

AC 302 Chapter 17 Question 25
Name				Date		
Instructor				Course		
Intermediate Accounting, 14th Edition by Kieso Weygandt and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
E17-25 (Fair Value Hedge) Sarazan Company issues a				4 	-year,	7.50%
fixed-rate interest only, non-prepayable			$1,000,000 	note payable on December 31, 2012. It 		
decides to change the interest rate from a fixed rate to variable rate and enters into a swap agreement with M&S Corp. The swap agreement specifies that Sarazan will receive a fixed rate at						
						
7.50%	and pay variable with settlement dates that match the interest payments on the debt. 					
Assume that interest rates have declined during 2013 and that Sarazan received						$13,000 
as an adjustment to interest expense for the settlement at December 31, 2013. The loss related to the .						
debt (due to interest rate changes) was			$48,000 	. The value of the swap contract increased		
$48,000 						
						
Instructions:						
(a) Prepare the journal entry to record the payment of interest expense on December 31, 2013.						
						
	Account title				Amount	
	Account title					Amount
						
(b) Prepare the journal entry to record the receipt of the swap settlement on December 31, 2013.						
						
	Account title				Amount	
	Account title					Amount
						
"(c) Prepare the journal entry to record the change in the fair value of the swap contract on
     December 31, 2013."						
						
						
	Account title				Amount	
	Account title					Amount
						
(d) Prepare the journal entry to record the change in the fair value of the debt on December 31, 2013.						
						
	Account title				Amount	
	Account title					Amount