A State Enterprise Fund Has $25 Million in Variable Rate

Essay

A state enterprise fund has $25 million in variable rate debt, due in 5 years, with the rate set annually on May 1 of each year, interest payable on April 30. On May 1, 2019, the start of its fiscal year, the variable rate on the debt is set at 3.5%. The fund enters a 5-year receive variable/pay fixed interest rate swap, where it agrees to pay a 3.8% fixed rate and receives the amount necessary to pay interest on its variable rate debt. The swap qualifies for hedge accounting, per SGAS 53. The swap has no value on May 1, 2019. Over fiscal year 2020, market interest rates fall, and the swap loses $80,000 in value. On May 1, 2020, the variable rate on the debt is set at 3.4%. Over fiscal year 2021, interest rates rise slightly and the swap gains $10,000 in value.
Required
Prepare the journal entries the enterprise fund makes to record the above information for fiscal years 2020 and 2021.