Exhibit 11.12 describes Chalk Hill s as e of an interest rate swap to hedge its cash flow exposure to interest rate risk from variable rate debt. The journal entries in the exhibit illustrate how special “hedge accounting” rules apply to the swap. Suppose instead that the swap did not qualify for special hedge accounting—but that all other aspects of the transaction remain as described in the exhibit.

Required:
Prepare the journal entries needed to account for the variable rate debt and swap transaction for January 1, 2014, through December 31, 2016.