On January 1,2011,Bosna Borrowed $100,000 from Lenda

On January 1,2011,Bosna borrowed $100,000 from Lenda.The three-year term note carries a variable rate interest,based on LIBOR,and interest is payable at December 31 of each year,compounded annually.The first year's rate of interest is 7% and Bosna would like to assure that their rate does not increase.Bosna enters into a pay-fixed,receive-variable interest rate swap agreement with Swamp City Bank,under which Bosna will pay 7%,fixed.At December 31,2011,it is determined that Bosna's interest rate to Lenda for 2012 will be 6%.At December 31,2012,the interest rate for 2013 was determined to be 8%.Treat as a cash flow hedge.
Required:
Determine the estimated fair value of the hedge at December 31,2011,and prepare the related journal entries required to document this hedge and the related interest payments at December 31,2011,2012,and 2013,including final repayment on 12/31/13.Assume a flat interest rate curve.