anglar company has a 3 million 7 bank loan from 255066

Anglar Company has a $3 million 7% bank loan from Castle Rock Bank. On January 1, 2007, when the $3 million loan has three years remaining, Anglar contracts with Susan Investment Bank to enter into a three-year interest-rate swap with a $3 million notional amount. Anglar agrees to receive from Susan a fixed interest rate of 7% and to pay Susan an interest amount each year that is variable based on the LIBOR interest rate at the beginning of the year. The interest payments are made at year-end. The applicable interest rate on the swap is reset each year after the annual interest payment is made. The LIBOR interest rate is 6.6% at the beginning of 2007. The three-year fixed interest rate is 8% at December 31, 2007.

Required

1. Prepare the journal entries of Anglar for the bank loan and derivative for 2007.

2. Prepare the appropriate disclosures in Anglar’s financial statements for 2007.

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