Charlie Company issues 10,000,000 fixed-rate debt at par with a coupon rate of 6% on 1/1/X1 that pays interest quarterly and enters into an interest-rate swap designated as a hedge of the debt to produce variable rate debt. The swap has a fair value of zero initially. The swap resets each quarter on the last day of the quarter and is perfectly effective. At 12/31/X1 the variable rate changes to 6.5%, which will cause a change in the fair value of the derivative.

Prepare any journal entries for 12/31/X1 & prepare any journal entries for 3/31/X2

	6.00%		Swap	Change
Date	Interest paid	Fair value debt	Fair value	fair values	Net cash
12/31/X1	$150,000	$9,825,100	($174,900)	($174,900)	$0
3/31/X2	$150,000	$9,834,800	($165,200)	$9,700	($12,500)