Question: Beaver Inc. issues a 5,000,000 5-year, 8% fixed-rate interest note payable on December 31, 2022. Beaver Inc. is worried that interest rates may decrease

Beaver Inc. issues a 5,000,000 5-year, 8% fixed-rate interest note payable on December 31, 2022. Beaver Inc. is worried that interest rates may decrease which would increase the value of its debt so it enters into a swap agreement with Lion Corp. The swap agreement specifies that Beaver Inc. will receive a fixed rate at 8% and pay a variable (floating) rate with settlement dates occurring on the dates interest payments are due. Interest payments are due annually on December 31st. The swap is classified as a FV Hedge. Required: 1) During 2023, market interest rates decreased to 7%. Which journal entries does Beaver Inc. record on December 31, 2023 to account for the note payable and the swap arrangement? 2) During 2024, market interest rates increased from 7% to 7.5%. What journal entries does Beaver Inc. record on December 31, 2024 to account for the note payable and the swap arrangement?

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