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On December 31, 2023, Pharoah Corp. had a $10-million, 7.50% 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 Pharoah 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, 2023, was 6.50%. 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. Pharoah 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: Date Dec. 31, 2023 June 30, 2024 Dec. 31, 2024 6-Month LIBOR Rate 6.50% 7.00% 5.50% Swap Fair Value $(200,000) 60,000 Debt Fair Value $10,000,000 9,800,000 10,060,000

On December 31, 2023, Pharoah Corp. had a $10-million, 7.50% 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 Pharoah 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, 2023, was 6.50%. 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. Pharoah 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: Date Dec. 31, 2023 June 30, 2024 Dec. 31, 2024 6-Month LIBOR Rate 6.50% 7.00% 5.50% Swap Fair Value $(200,000) 60,000 Debt Fair Value $10,000,000 9,800,000 10,060,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Present the journal entries to record the following transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) 1. 2. 3. 4. 5. The entry, if any, to record the swap on December 31, 2023 The entry to record the semi-annual debt interest payment on June 30, 2024 The entry to record the settlement of the semi-annual swap amount receivable at 7.50%, less the amount payable at LIBOR, 6.50% The entry, if any, to record the change in the swap's fair value at June 30, 2024 The entry, if any, to record the change in the debt's fair value at June 30, 2024 Date December 31, 2023 June 30, 2024 June 30, 2024 June 30, 2024 June 30, 2024 eTextbook and Media Account Titles and Explanation No Entry No Entry List of Accounts Save for Later Last saved 4 days ago. Saved work will be auto-submitted on the due date. Auto- submission can take up to 10 minutes. Debit 0 ▪▪▪▪ Cri Attempts: 0 of 5 used 5 Assistance Used Submit Answer
Transcribed Image Text:Present the journal entries to record the following transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) 1. 2. 3. 4. 5. The entry, if any, to record the swap on December 31, 2023 The entry to record the semi-annual debt interest payment on June 30, 2024 The entry to record the settlement of the semi-annual swap amount receivable at 7.50%, less the amount payable at LIBOR, 6.50% The entry, if any, to record the change in the swap's fair value at June 30, 2024 The entry, if any, to record the change in the debt's fair value at June 30, 2024 Date December 31, 2023 June 30, 2024 June 30, 2024 June 30, 2024 June 30, 2024 eTextbook and Media Account Titles and Explanation No Entry No Entry List of Accounts Save for Later Last saved 4 days ago. Saved work will be auto-submitted on the due date. Auto- submission can take up to 10 minutes. Debit 0 ▪▪▪▪ Cri Attempts: 0 of 5 used 5 Assistance Used Submit Answer
On December 31, 2023, Pharoah Corp. had a $10-million, 7.50% 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 Pharoah 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, 2023, was 6.50%. 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. Pharoah 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: Date Dec. 31, 2023 June 30, 2024 Dec. 31, 2024 6-Month LIBOR Rate 6.50% 7.00% 5.50% Swap Fair Value $(200,000) 60,000 Debt Fair Value $10,000,000 9,800,000 10,060,000
Transcribed Image Text:On December 31, 2023, Pharoah Corp. had a $10-million, 7.50% 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 Pharoah 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, 2023, was 6.50%. 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. Pharoah 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: Date Dec. 31, 2023 June 30, 2024 Dec. 31, 2024 6-Month LIBOR Rate 6.50% 7.00% 5.50% Swap Fair Value $(200,000) 60,000 Debt Fair Value $10,000,000 9,800,000 10,060,000
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