On January 1, 2025, ABC Corp. issued 10-year, $100,000 bonds at par. The bonds make payments annually on December 31 at a stated fixed rate of interest of 8.0%. On January 1, 2025, ABC Corp. also entered into an interest rate swap. In this arrangement, ABC Corp. paid variable interest rates to a swap bank based on the end of year variable rate and in return, the swap bank paid fixed interest to ABC Corp. Interest rates during the first year of the interest rate swap were the following: Date Fixed rate Market rate January 1, 2025 December 31, 2025 As a result of the change in interest rates, as of December 31, 2025 the bond liability had a fair value of $103,843 and the interest rate swap had a fair value of $3,843. ABC Corp. posts gains and losses associated with fair value changes on the swap and bonds to interest expense. Req Required: Provide the appropriate journal entries prepared by ABC Corp. on December 31, 2025. View transaction list Provide the appropriate journal entries prepared by ABC Corp. on December 31, 2025. Journal entry worksheet 8.0% 8.0% 1 8.0% 7.4% 23 S.No/Date Dec. 31, 2025 Net settlement amount paid or received on the interest rate swap. Note: Enter debits before credits. Account Title Debit Credit >
On January 1, 2025, ABC Corp. issued 10-year, $100,000 bonds at par. The bonds make payments annually on December 31 at a stated fixed rate of interest of 8.0%. On January 1, 2025, ABC Corp. also entered into an interest rate swap. In this arrangement, ABC Corp. paid variable interest rates to a swap bank based on the end of year variable rate and in return, the swap bank paid fixed interest to ABC Corp. Interest rates during the first year of the interest rate swap were the following: Date Fixed rate Market rate January 1, 2025 December 31, 2025 As a result of the change in interest rates, as of December 31, 2025 the bond liability had a fair value of $103,843 and the interest rate swap had a fair value of $3,843. ABC Corp. posts gains and losses associated with fair value changes on the swap and bonds to interest expense. Req Required: Provide the appropriate journal entries prepared by ABC Corp. on December 31, 2025. View transaction list Provide the appropriate journal entries prepared by ABC Corp. on December 31, 2025. Journal entry worksheet 8.0% 8.0% 1 8.0% 7.4% 23 S.No/Date Dec. 31, 2025 Net settlement amount paid or received on the interest rate swap. Note: Enter debits before credits. Account Title Debit Credit >
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 4EA: On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated...
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Transcribed Image Text:On January 1, 2025, ABC Corp. issued 10-year, $100,000 bonds at par. The bonds make payments
annually on December 31 at a stated fixed rate of interest of 8.0%.
On January 1, 2025, ABC Corp. also entered into an interest rate swap. In this arrangement, ABC Corp.
paid variable interest rates to a swap bank based on the end of year variable rate and in return, the swap
bank paid fixed interest to ABC Corp.
Interest rates during the first year of the interest rate swap were the following:
Date
Fixed rate
Market rate
January 1, 2025
December 31, 2025
As a result of the change in interest rates, as of December 31, 2025 the bond liability had a fair value
of $103,843 and the interest rate swap had a fair value of $3,843. ABC Corp. posts gains and losses
associated with fair value changes on the swap and bonds to interest expense.
Req
Required:
Provide the appropriate journal entries prepared by ABC Corp. on December 31, 2025.
View transaction list
Provide the appropriate journal entries prepared by ABC Corp. on December 31, 2025.
Journal entry
worksheet
1
8.0%
8.0%
2
S.No/Date
Dec. 31, 2025
3
8.0%
7.4%
Net settlement amount paid or received on the interest rate swap.
Note: Enter debits before credits.
Record entry
Account Title
Clear entry
m
Debit
Credit
View general journal
>
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