1. On October 15, our company has executed a purchase order for new equipment to be purchased from a supplier in Denmark for a purchase price of DKK 1.2 million. The equipment is deliverable on March 31. In order to hedge the commitment to pay DKK1.2 million, we enter into a forward exchange contract on October 15 to receive DKK1.8 million on March 31 at an exchange rate of $0.17: DKK1. Assume the following exchange gates:

Date Spot Rates Forward Rates

October 15 $0.15: DKK1 $0.17: DKK1

December 31 $0.16: DKK1 $0.18: DKK1

March 31 $0.20: DKK1 n/a

1. Prepare the journal entries to record the following:

Execution of the purchase order and forward contract

Adjusting entries at December 31

Receipt of equipment and payment to equipment supplier on March 31.