Question : Hedge accounting marks
On Jan Fusion Company issues a year, $ note at HIBOR, with interest
paid annually to purchase an equipment. The HIBOR is reset at the end of each year. HIBOR
rate for the first year of is at
Fusion Company decides that it prefers fixed rate financing and wants to lock in a rate of
As a result, on Jan Fusion enters into an interest swap agreement to pay fixed
rate and receive HIBOR based on $ principal amount of the note. The variable
interest rate is reset to for year
Required:
a Prepare the journal entry for the year
b Prepare the journal entry for the year
