Multiple Choice Questions
1. What is Golden's gain or loss on the cap (the change in time value) for the 6-month period ending December 31, 2013?
a. $5, 000 gain
b. $6, 000 loss
c. $1, 000 loss
d. $5, 000 loss
2. How much does Sunny pay or receive to settle the swap for the 6-month period ending June 30, 2013?
a. $ 1, 000 paid
b. $20, 000 received
c. $19, 000 paid
d. $ 1, 000 received
3. Suppose the fixed rate debt changed in value by $80, 000 as of June 30, 2013. How does Sunny record this change in value?
a. Gain reported in income
b. Loss reported in income
c. Loss reported in OCI
d. Not recorded
4. Suppose the swap contract changed in value by $80, 000 as of June 30, 2013. How does Sunny record this change in value?
a. Gain reported in income
b. Loss reported in income
c. Loss reported in OCI
d. Not recorded
5. Suppose the same facts as above, except Sunny Corporation has variable rate debt, with interest payments at LIBOR, and enters a receive variable/pay fixed interest rate swap, with the annual fixed rate set at 4%. The swap changed in value by $80, 000 as of June 30, 2013. How does Sunny record this change in value?
a. Gain reported in income
b. Loss reported in income
c. Loss reported in OCI
d. Not recorded