1. Happ, Inc. agreed to purchase merchandise from a British vendor on November 30, 2018. The goods will arrive on January 31, 2019, and payment of 100,000 British pounds is due at that time. On November 30, 2018, Happ signed an agreement with a foreign exchange broker to buy 100,000 British pounds on January 31, 2019. Exchange rates to purchase 1 British pound are as follows:

Forward Rates for

Spot Rates January 31, 2019

November 30, 2018 $1.59 $1.60

December 31, 2018 1.62 1.63

January 31, 2019 1.65 1.65

Because of this commitment hedge, Happ, Inc., will record the merchandise at what value when it arrives in January?

1. $165,000.
2. $163,000.
3. $160,000.

$159,000.