*E17-23B (Fair Value Hedge) On January 1, 2014, K-Store Inc. issued a 10-year, $500,000 note at 8% fixed interest, interest payable semiannually. K-Store preferred a variable-rate note, but its lender offered only fixed-rate loans. As a result, K-Store en

*E17-23B (Fair Value Hedge) On January 1, 2014, K-Store Inc. issued a 10-year, $500,000 note at 8% fixed interest, interest payable semiannually. K-Store preferred a variable-rate note, but its lender offered only fixed-rate loans. As a result, K-Store entered into an interest rate swap on the same day where it agrees to receive 8% fixed and pay LIBOR of 5.6% for the first 6 months on $500,000. At each 6-month period, the variable rate will be reset. The variable rate is reset to 6.2% on June 30, 2014.
Instructions
(a) Compute the net interest expense to be reported for this note and related swap transaction as of June 30, 2014.
(b) Compute the net interest expense to be reported for this note and related swap transaction as of December 31, 2014.