CPA · Question 26 · Area II: Technical Accounting
A company has a variable-rate loan and wishes to fix its interest payments. It enters into an interest rate swap (pay fixed, receive variable) that qualifies as a Cash Flow Hedge. At the end of the reporting period, the swap has a fair value gain of $50,000. The hedge is fully effective. Which of the following is the correct journal entry to record the change in fair value?
Answer options:
Debit Swap Asset $50,000; Credit Gain on Swap (Income) $50,000
Debit OCI $50,000; Credit Swap Asset $50,000
Debit Swap Asset $50,000; Credit Other Comprehensive Income (OCI) $50,000
Debit Swap Asset $50,000; Credit Interest Expense $50,000
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