P 13-8 Foreign currency hedge, existing payable Mar, a U.S. firm, purchased equipment for 400,000 British pounds from Thc on December 16, 2016. The terms were n/30, payable in British pounds.

On December 16, 2016, Mar also entered into a 30-day forward contract to hedge the account payable to Thc. The forward contract is settled net. Exchange rates for British pounds on selected dates are as follows:

12/16/16 12/31/16 1/15/17 Spot rate $1.67 $1.65 $1.64 Forward rate for 1/15/17 $1.68 $1.66 $1.64 REQuIRED 1. Assuming this situation qualifies as a cash-flow hedge, prepare journal entries on December 16, 2016, to record Mar’s purchase and the forward contract. A 6 percent interest rate is appropriate.