What amounts of derivative asset should safe recognize

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On January 1, 20x1, Safe Journey Co. enters into an interest rate swap on a ?2,000,000 loan. Under the swap agreement, Safe agrees to pay fixed interest of 8% and receive interest based on whatever the current market rate is at the start of each year. Swap payment shall be made on Dec. 31, 20x2.

The following are the current market rates:

Jan. 1, 20x1.............8%

Jan. 1, 20x2 ...........10%

Problem 1: What amounts of derivative asset (liability) should Safe recognize on Jan. 1, 20x1 and Dec. 31, 20x1, respectively?

a. 0; 40,000

b. 0; (40,000)

c. 40,000; 36,364

d. 0; 36,364

Reference no: EM132905532

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