Question

In: Accounting

On January, 20x1, Cedula Co. enters into an interest rate swap for a notional amount of...

On January, 20x1, Cedula Co. enters into an interest rate swap for a notional amount of 1,000,000. Under the agreement, ABC Co. shall receive variable interest and pay fixed interest based on a fixed rate of 14%. The interest rate swap will be settled net on December 31, 20x2.

The following are the current market rates:
Jan.1, 20x1 14%
Jan.1, 20x2 12%

Provide Journal entries.

Solutions

Expert Solution

The Solution is given in the picture attached. In the question, since maket interest rate as on 31-Dec-20x2 is not given, we have assumed it to be 15% so that journal entries on date of settlement i.e. 31-Dec-20x2 can be shown.

ekkarill92 answered 2 years ago
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