On October 15, our company has executed a purchase order for new equipment to be purchased from a supplier in France for a purchase price of million. The equipment is deliverable on March 31. In order to hedge the commitment to pay 0.5 million, we enter into a forward exchange contract on October 15 to receive 0.5 million on March 31 at an exchange rate of $1.35: 1. Assume the following exchange rates:

Date Spot Rate March 31

October 15 $1.10:1 $1.35:1

December 31 $1.25:1 $1.40:

March 31 $1.42:1 n/a

Required: Prepare the journal entries to record the following:

Execution of the purchase order and forward contract

Adjusting entries at December 31

Receipt of eqipment and payment to equipment supplier on March 31