PROBLEM 1

On October 1, 2017, KAZZIE Company ordered some equipment from a supplier for 200,000 baht. Delivery and payment is to occur on November 30, 2017. The spot rates on October 1 and November 30 are P1.50 and P1.30.

1. If the company does not hedge the commitment, at what amount is the equipment recorded on the books on November 30, 2017?

2. If the company acquires on October 1, 2017 a forward contract to hedge any unfavorable changes in fair value of the equipment, at what amount is the equipment recorded on the books on November 30, 2017? The October 1, 2017 forward rate for November 30 settlement is P1.35