on december 31 2014 master corp had a 10 million 8 fixed rate note outstanding that 3387209

On December 31, 2014, Master Corp. had a $10-million, 8% fixed-rate note outstanding that was payable in two years. It decided to enter into a two-year swap with First Bank to convert the fixed-rate debt to floating-rate debt. The terms of the swap specified that Master will receive interest at a fixed rate of 8% and will pay a variable rate equal to the six-month LIBOR rate, based on the $10-million amount. The LIBOR rate on December 31, 2014, was 7%. The LIBOR rate will be reset every six months and will be used to determine the variable rate to be paid for the following six-month period. Master Corp. designated the swap as a fair value hedge. Assume that the hedging relationship meets all the conditions necessary for hedge accounting and that IFRS is a constraint. The six-month LIBOR rate and the swap and debt fair values were as follows: Instructions (a) Present the journal entries to record the following transactions: 1. The entry, if any, to record the swap on December 31, 2014 2. The entry to record the semi-annual debt interest payment on June 30, 2015 3. The entry to record the settlement of the semi-annual swap amount receivable at 8%, less the amount payable at LIBOR, 7% 4. The entry, if any, to record the change in the debt s fair value at June 30, 2015 5. The entry, if any, to record the change in the swap s fair value at June 30, 2015 (b) Indicate the amount(s) reported on the statement of financial position and income statement related to the de

 

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