Derivatives : Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options. Interest rate swap : This is a type of derivative used by two parties under a contract to exchange the consequences (net cash difference between interest payments) of fixed interest rate for floating interest rate, or vice versa, without exchanging the principal or notional amounts. Journal entry : Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically. Debit and credit rules: Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts. Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts. To journalize : The entries of issue of note, interest payments, and adjustment entries to reflect fair value from January 1, 2016 through June 30, 2016.

Question

Want to see the full answer?

Answer 1

Question

Chapter A, Problem A.5E

To determine

Derivatives: Derivatives are some financial instruments which are meant for managing risk and safeguard the risk created by other financial instruments. These financial instruments derive the values from the future value of underlying security or index. Some examples of derivatives are forward contracts, interest rate swaps, futures, and options.

Interest rate swap: This is a type of derivative used by two parties under a contract to exchange the consequences (net cash difference between interest payments) of fixed interest rate for floating interest rate, or vice versa, without exchanging the principal or notional amounts.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.

Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To journalize: The entries of issue of note, interest payments, and adjustment entries to reflect fair value from January 1, 2016 through June 30, 2016.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

What is the correct answer with accounting question

1. How can an accounting system help you find anomalies or variances in financial data? 2. Assume you calculated a financial ratio variance of 2x the usual balance for accounts receivable. Why did you calculate a financial ratio variance of 2x the usual balance? 3. You are a small company that calculates a normal current ratio at 1.95. This period the current ratio is only 1.45. Why has the ratio decreased?

Please give me true answer this financial accounting question