On January $1,2025,$ ABC Corp. issued $10-$year, $$100,000$ bonds at par. The bonds make payments annually on December $31$ at a

stated fixed rate of interest of $5\mathrm{.}0\%.$

On January $1,2025,$ ABC Corp. also entered into an interest rate swap. In this arrangement, ABC Corp. paid variable interest rates to a

swap bank and in return, the swap bank paid fixed interest to ABC Corp.

Interest rates during the first year of the interest rate swap were the following:

As a result of the change in interest rates, as of December $31,2025$ the bond liability had a fair value of $$106,661$ and the interest rate

swap had a fair value of $$6,661.$

Required:

Provide the appropriate journal entry prepared by ABC Corp. on December $31,2025$ to record the net settlement amount paid or

received on the interest rate swap.

What amount would the company report as Bonds Payable in its December $31,2025$ balance sheet?

What is the net amount of interest expense ABC Corp. would include in its December $31,2025$ income statement for the hedged

debt obligation? $($Enter all amounts as positive values.$)$

Req $1$

Req $2$

Req $3$

Provide the appropriate journal entry prepared by ABC Corp. on December $31,2025$ to record the net settlement amount paid

or received on the interest rate swap.