On December 31, 2020, Ivanhoe Corp. had a $ 11,600,000, 7.0% fixed-rate note outstanding, payable in 2 years. It decides to enter into a 2-year swap with Chicago First Bank to convert the fixed-rate debt to variable-rate debt. The terms of the swap indicate that Ivanhoe will receive interest at a fixed rate of 7.0% and will pay a variable rate equal to the 6-month LIBOR rate, based on the $ 11,600,000 amount. The LIBOR rate on December 31, 2020, is 6.0%. The LIBOR rate will be reset every 6 months and will be used to determine the variable rate to be paid for the following 6-month period. Ivanhoe Corp. designates the swap as a fair value hedge. Assume that the hedging relationship meets all the conditions necessary for hedge accounting. The 6-month LIBOR rate and the swap and debt fair values are as follows. Date 6-Month LIBOR Rate Swap Fair Debt Fair
Value Value
December 31, 2020 6.0 % $ 11,600,000
June 30, 2021 6.5 % ( 194,400 ) 11,405,600
December 31, 2021 5.0 % 54,910 11,654,910
Prepare the journal entries for:
(a) 6/30/2018
(b) 12/31/2018