Special Topics

Answer to Quiz
Notional
5,000,000.00
Semiannual
Interest
Interest
2014
2015
2016
2017
10%
8%
12%
14%
No. of Periods
5%
4%
6%
7%
6
4
2
Journal Entries
2014
1/1/2014
Cash
5,000,000
Bonds Payable
6/30/2014
Interest Expense
Cash
250,000
12/31/2014
Interest Expense
Cash
250,000
December 31, 2014

Bonds
5,000,000 x
0.790
250,000 x
5.242
Present valye of BP as of 12/31/2014
Carrying amount
Loss on Bonds Payable
Derivative
Gain on Interest Rate Swap
(5%-4%)x5,000,000x5.242
3,950,000
1,310,500
5,260,500
5,000,000
260,500
(262,100.00)
12/31/2014
Loss on Bonds Payable

Bonds Payable
260,500
12/31/2014
Interest Rate Swap Receivable

Gain on Interest Rate Swap
262,100
Interest Expense
Cash
250,000
2015
6/30/2015
6/30/2015
Bonds Payable
Interest Expense
39,580
6/30/2015
Cash
50,000
Interest Rate Swap receivable
12/31/2015
Interest Expense
Cash
12/31/2015
Bonds Payable
Interest Expense
250,000
41,163
12/31/2015
Cash
50,000
Interest Rate Swap receivable
December 31, 2015

Bonds
5,000,000 x
0.792
250,000 x
3.465
Carrying amount
6/30/2015
12/31/2015
3,960,000
866,250
4,826,250
5,260,500
(39,580)
(41,163)
Gain on Bonds Payable

Derivative
(5%-6%)x5,000,000x3.465
Less:
6/30/2015
12/31/2015
Loss on Interest Rate Swap
5,179,757
(353,507)
173,250
(262,100)
50,000
50,000
(162,100)
335,350
12/31/2015
Bonds Payable
353,507
12/31/2015

Interest Rate Swap Receivable
Interest Rate Swap Payable
335,350
Interest Expense
Cash
250,000
2016
6/30/2016
6/30/2016
Interest Expense
Bonds Payable
39,575
6/30/2016

Cash
50,000
12/31/2016
Interest Expense
Cash
250,000
12/31/2016
Interest Expense
Bonds Payable
41,950
12/31/2016

Cash
50,000
December 31, 2016

Bonds
5,000,000 x
0.873
250,000 x
1.808
Carrying amount
6/30/2015
12/31/2015
4,365,000
452,000
4,817,000
4,826,250
39,575
41,950
4,907,775
(90,775)
Derivative
(5%-7%)x5,000,000x1.808
Less:
6/30/2015
12/31/2015
180,800
173,250
(50,000)
(50,000)
73,250
107,550
12/31/2016
Bonds Payable
12/31/2016

107,550
Interest Expense
Cash
250,000
2017
6/30/2017
90,775
6/30/2017
Interest Expense
Bonds Payable
87,190
6/30/2017

Cash
100,000
12/31/2017
Interest Expense
Cash
250,000
12/31/2017
Interest Expense
Bonds Payable
95,810
12/31/2017

Cash
80,800
19,200
12/31/2017
Bonds Payable
Cash
5,000,000
Present Value
of 1
0.790
0.792
0.873
5,000,000
250,000
250,000
260,500
262,100
250,000
39,580
50,000
250,000
41,163
Present value of ordinary

annuity of 1
5.242
3.465
1.808
50,000
353,507
162,100
173,250
250,000
39,575
50,000
250,000
41,950
50,000
90,775
107,550
250,000
87,190
100,000
250,000
95,810
100,000
5,000,000

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Answer to Quiz

December 31, 2014

Loss on Bonds Payable

Interest Rate Swap Receivable

December 31, 2015

Gain on Bonds Payable

Loss on Interest Rate Swap

Interest Rate Swap Payable

Interest Rate Swap Payable

December 31, 2016

Loss on Interest Rate Swap

Interest Rate Swap Payable

Interest Rate Swap Payable

Present value of ordinary

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