On July 1, 20X1, Littleton Inc Required:
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Prepare All Entries to Record This Hedge Through

On July 1, 20X1, Littleton Inc.loaned a key supplier of raw material $2,000,000 to construct a new processing facility.The loan is due on July 1, 20X3 and pays interest each December 31 and June 30.The supplier insisted on a variable rate loan.Charles Upton, controller of Littleton Inc., wants to avoid the risk of variable interest rate fluctuations.As a result, Littleton Inc.entered into an interest rate swap in which it will pay the variable rate on $2,000,000 in exchange for a fixed interest rate of 8.3%.The swap is settled on the interest payment dates.Variable interest rates and the value of the swap on selected dates are as follows:
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$\begin{array}{lll}&\text { Variable } \\&\text { Interest }&\text { Value of } \\&\text { Rate }&\text { the Swap }\\\text { July } 1,20 \mathrm{X} 1 & 7.90 \% & \\\text { December } 31,20 \mathrm{X} 1 & 7.75 \% & \$ 10,400\end{array}$

Required:
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Prepare all entries to record this hedge through December 31, 20X1.