Exercise 123 On January 2, 2018, Tylor Company issued a 4-year, $650,000 note at 8% fixed interest, interest payable semiannually. Tylor now wants to change the note to a variable rate note. As a result, on January 2, 2018, Tylor Company enters into an interest rate swap where it agrees to receive 8% fixed and pay LIBOR of 5.7% for the first 6 months on $650,000. At each 6-month period, the variable interest rate will be reset. The variable rate is reset to 6.5% on June 30, 2018. Compute the net interest expense to be reported for this note and related swap transaction as of June 30, 2018. Net interest expense $ LINK TO TEXT Compute the net interest expense to be reported for this note and related swap transaction as of December 31, 2018. Net interest expense $
Exercise 123 On January 2, 2018, Tylor Company issued a 4-year, $650,000 note at 8% fixed...
Exercise 123
On January 2, 2018, Tylor Company issued a 4-year, $650,000 note
at 6% fixed interest, interest payable semiannually. Tylor now
wants to change the note to a variable rate note. As a result, on
January 2, 2018, Tylor Company enters into an interest rate swap
where it agrees to receive 6% fixed and pay LIBOR of 5.5% for the
first 6 months on $650,000. At each 6-month period, the variable
interest rate will be reset. The variable rate...
*Exercise 123 On January 2, 2018, Tylor Company issued a 4-year, $550,000 note at 6% fixed Interest, interest payable semiannually. Tylor now wants to change the note to a variable rate note. As a result, on January 2, 2018, Tylor Company enters into an interest rate swap where it agrees to receive 6% fixed and pay LIBOR of 5.7% for the first 6 months on $550,000. At each 6-month period, the variable interest rate will be reset. The variable rate...
Exercise 17-25 On January 2, 2020, Concord Co. issued a 4-year, $112,000 note at 6% fixed interest, interest payable semiannually. Concord now wants to change the note to a variable-rate note. As a result, on January 2, 2020, Concord Co. enters into an interest rate swap where it agrees to receive 6% fixed and pay LIBOR of 5.60% for the first 6 months on $112,000. At each 6-month period, the variable rate will be reset. The variable rat is reset...
Exercise 16-21
On January 2, 2020, Crane Corp. issued a $82,000, four–year note
at prime plus 1% variable interest, with interest payable
semi–annually. On the same date, Crane entered into an interest
rate swap where it agreed to pay 8% fixed and receive prime plus 1%
for the first six months on $82,000. At each six–month period, the
variable rate will be reset. The prime interest rate is 7.7% on
January 2, 2020, and is reset to 8.7% on June...
On December 31, 2020, Cheyenne Corp. had a $11,800,000, 8.0% fixed-rate note outstanding, payable in 2 years. It decides to enter into a 2- year swap with Chicago First Bank to convert the fixed-rate debt to variable-rate debt. The terms of the swap indicate that Cheyenne will receive interest at a fixed rate of 8.0% and will pay a variable rate equal to the 6-month LIBOR rate, based on the $11,800,000 amount. The LIBOR rate on December 31, 2020, is...
Exercise A-6 Derivatives; interest rate swap; fixed-rate debt; fair value change unrelated to hedged On January 1, 2018, LLB Industries borrowed $290,000 from trust Bank by issuing a two-year, 8% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2018, 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...
On January 2, 2020, Sheridan Corp. issues a $12–million, five–year note at LIBOR, with interest paid annually. To protect against the cash flow uncertainty related to interest payments that are based on LIBOR, Sheridan entered into an interest rate swap to pay 4% fixed and receive LIBOR based on $12 million for the term of the note. The LIBOR rate for the first year is 3.5%. The LIBOR rate is reset to 4.9% on January 2, 2021. Sheridan follows ASPE...
On January 2, 2020, Crane Corp. issues a $10–million, five–year note at LIBOR, with interest paid annually. To protect against the cash flow uncertainty related to interest payments that are based on LIBOR, Crane entered into an interest rate swap to pay 7% fixed and receive LIBOR based on $10 million for the term of the note. The LIBOR rate for the first year is 6.7%. The LIBOR rate is reset to 7.8% on January 2, 2021. Crane follows ASPE...
Exercise A-5 (Algo) Derivatives; interest rate swap; fixed rate debt; extended method (LOA-6) pints 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...
Problem 17-15 On December 31, 2020, Pearl Corp. had a $11,700,000, 8.0% fixed-rate note outstanding, payable in 2 years. It decides to enter into a 2-year swap with Chicago First Bank to convert the fixed-rate debt to variable-rate debt. The terms of the swap indicate that Pearl will receive interest at a fixed rate of 8.0% and will pay a variable rate equal to the 6-month LIBOR rate, based on the $11,700,000 amount. The LIBOR rate on December 31, 2020,...