e. Interest Rate Swap—The company has a 12-month note receivable with a face value of $10,000,000 that matures on June 30 of next year. The note calls for interest to be paid at the end of each month...

e. Interest Rate Swap—The company has a 12-month note receivable with a face value of $10,000,000 that matures on June 30 of next year. The note calls for interest to be paid at the end of each month based on the LIBOR variable interest rate at the beginning of each month. On July 31, the company entered into an agreement to receive a 7% fixed rate of interest beginning in August in exchange for payment of a variable rate based on LIBOR. The reset date is at the beginning of each month, and net settlement occurs at the end of each month. LIBOR rates and swap values are as follows:

In all of the above cases, the change in the time value of the derivative instrument is excluded from the assessment of hedge effectiveness. Furthermore, the company assesses hedge effectiveness on a continuing basis. Such an assessment at the end of June concluded that call option B was not effective.

Prepare a schedule to reflect the effect on current earnings of the above hedging relationships. The schedule should show relevant amounts for each month from July through September.