Reference no: EM133188055
Question - On January 1, 2020, ABC Co. borrowed P5,000,000 from a bank at a variable rate of interest for 4 years. Interest will be paid annually to the bank on December 31, and the principal is due on December 31, 2023. Under the agreement, the market rate of interest on each January 1 resets the variable rate for that period and the amount of interest to be paid on December 31.
To protect itself from fluctuations in interest rate, the entity hedged the variable interest by entering into a four-year "receive variable, pay fixed" interest rate swap with a speculator. The interest rate swap s based on the notional amount of P5,000,000 and an 8% fixed interest rate. This agreement means that the entity will receive a swap payment from the speculator if the market rate on January 1 is more than 8% and will make a swap payment to the speculator if the market rate on January 1 is lower than 8%. The swap payments are made at the end of each year. The entity has designated this interest rate swap as cash flow hedge of the variability of interest payments of the variable rate loan.
The market rates are 8% on January 1, 2020, 10% on January 1, 2021, 11% on January 1, 2022 and 12% on January 1, 2023. Round off all final answers to the nearest peso.
Required -
1. How much is the value of the derivative asset as of December 31, 2022?
2. How much is the interest expense to be reported in the 2023 income statement?
|
What is the total remuneration the royalty group will get
: Question - Listing brokers A & B from Royalty Group list a home for $200,000. What is the total remuneration the Royalty Group will get
|
|
Calculate bond equivalent yield and effective annual return
: Calculate the bond equivalent yield and effective annual return on a negotiable CD that is 115 days from maturity and has a quoted nominal yield of 6.56%
|
|
Explain the transformative power of love
: Explain the transformative power of love in both contexts. Add supporting citations to strengthen your claims.
|
|
Describe the ethical dilemma encountered
: A shift manager comes to you with a problem, explaining that one employee is disrupting the staffing schedule by repeatedly not showing up on time.
|
|
How much is the value of the derivative asset as of december
: The market rates are 8% on January 1, 2020, 10% on January 1, 2021, 11% on January 1, 2022. How much is the value of the derivative asset as of December
|
|
Mcdonald-russia watchdog widens probe into food chain
: This activity will provide an understanding of the principles of global supply chain management, (Course Objective # 6), as well as the Global R&D that takes pl
|
|
How much is the inventory to be presented
: How much is the inventory to be presented in the combined statement of financial position as of December 31, 2022 related to the transaction
|
|
Management commission fee and quotes
: You are at a possible listing appointment with a new landlord when he questions your management commission fee and quotes a substantially less rate from your co
|
|
Business decision-making process
: The task is to undertake a simulation (role-play) of the business decision-making process. This simulation is to be completed and submitted individually.
|