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1. Calculate the net cash settlement on the swap at March 31 and June 30, 2021.

2. Prepare the journal entries through June 30, 2021

Record the issuance of the note

Record the interest on the note

Record the net cash settlement on the swap

Record the change in fair value of the derivative

Record the change in fair value of the note

Record the interest on the note

Record the net cash settlement on the swap

Record the change in fair value of the derivative

Record the change in fair value of the note

On January 1, 2021, LLB Industries borrowed $360,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to recelve payment based on a 10% fixed interest rate on a notional amount of $360,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (UBOR) settlement rates were 10\% at January 1,8\% at March 31, and 6% June 30,2021 . The fair values of the swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as indicated below. Required: 1. Calculate the net cash settlement on the swap at March 31 and June 30,2021 2. Prepare the journal entries through June 30, 2021, to record the issuance of the note, interest, and necessary adjustments for changes in fair value. Complete this question by entering your answers in the tabs below. Calculate the net cash settlement on the swap at March 31 and June 30,2021

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