On january 1, 2020, TT Corporation invested in Inci Inc's two-year, 10% notes, with interest receivable quarterly. TT entered into a two-year interest rate swap agreement on January 1, 2020 and designated the swap as a fair value hedge. The agreement called TT to make payment based on a 10% fixed interest rate on a notional amount of $200,000 and to receive interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 10% at January 1, 8% at March 31, and 6% June 30, 2020. The fair values of the investment in notes and swap agréement are as follows: January 1 March 31 June 30 Fair value of interest rate swap Fair value of the investment in notes $6,200 $206,200 $12,000 $212,000 $200,000 What will TT record on June 30? O a. $5,800 as debit to Swap account Ob. $5,800 as credit to Swap account Oc. $12,000 as credit to Swap account Od. $12,000 as debit to Swap account
On january 1, 2020, TT Corporation invested in Inci Inc's two-year, 10% notes, with interest receivable quarterly. TT entered into a two-year interest rate swap agreement on January 1, 2020 and designated the swap as a fair value hedge. The agreement called TT to make payment based on a 10% fixed interest rate on a notional amount of $200,000 and to receive interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 10% at January 1, 8% at March 31, and 6% June 30, 2020. The fair values of the investment in notes and swap agréement are as follows: January 1 March 31 June 30 Fair value of interest rate swap Fair value of the investment in notes $6,200 $206,200 $12,000 $212,000 $200,000 What will TT record on June 30? O a. $5,800 as debit to Swap account Ob. $5,800 as credit to Swap account Oc. $12,000 as credit to Swap account Od. $12,000 as debit to Swap account
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2020, TT Corporation invested in Inci Inc.'s two-year, 109% notes, with interest receivable quarterly. TT entered into a two-year interest
rate swap agreement on January 1, 2020 and designated the swap as a fair value hedge. The agreement called TT to make payment based on a 10%
fixed interest rate on a notional amount of $200,000 and to receive interest based on a floating interest rate. The contract called for cash
settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 10% at January 1, 8% at March 31, and 6% June 30, 2020.
The fair values of the investment in notes and swap agreement are as follows:
January 1
March 31
June 30
Fair value of interest rate swap
Fair value of the investment in notes
$6,200
$206,200
$12,000
$212,000
$200,000
What will TT record on June 30?
O a. $5,800 as debit to Swap account
O b. $5,800 as credit to Swap account
O c. $12,000 as credit to Swap account
O d. $12,000 as debit to Swap account
O e. No entry to Swap account
628 P
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