A U.S. company’s foreign subsidiary had these amounts in local currency units (LCU) in 2024: Cost of goods sold LCU 5,420,000 Beginning inventory 550,000 Ending inventory 603,000 The average exchange rate during 2024 was $1.60 = LCU 1. The beginning inventory was acquired when the exchange rate was $1.40 = LCU 1. Ending inventory was acquired when the exchange rate was $1.70 = LCU 1. The exchange rate on December 31, 2024, was $1.75 = LCU 1. Required: Assuming that the foreign country is highly inflationary, determine the amount at which the foreign subsidiary’s cost of goods sold should be reflected in the U.S. dollar income statement. Cost of goods sold
A U.S. company’s foreign subsidiary had these amounts in local currency units (LCU) in 2024: Cost of goods sold LCU 5,420,000 Beginning inventory 550,000 Ending inventory 603,000 The average exchange rate during 2024 was $1.60 = LCU 1. The beginning inventory was acquired when the exchange rate was $1.40 = LCU 1. Ending inventory was acquired when the exchange rate was $1.70 = LCU 1. The exchange rate on December 31, 2024, was $1.75 = LCU 1. Required: Assuming that the foreign country is highly inflationary, determine the amount at which the foreign subsidiary’s cost of goods sold should be reflected in the U.S. dollar income statement. Cost of goods sold
Chapter10: Measuring Exposure To Exchange Rate Fluctuations
Section: Chapter Questions
Problem 1IEE
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Question
A U.S. company’s foreign subsidiary had these amounts in local currency units (LCU) in 2024:
Cost of goods sold | LCU 5,420,000 |
---|---|
Beginning inventory | 550,000 |
Ending inventory | 603,000 |
The average exchange rate during 2024 was $1.60 = LCU 1. The beginning inventory was acquired when the exchange rate was $1.40 = LCU 1. Ending inventory was acquired when the exchange rate was $1.70 = LCU 1. The exchange rate on December 31, 2024, was $1.75 = LCU 1.
Required:
Assuming that the foreign country is highly inflationary, determine the amount at which the foreign subsidiary’s cost of goods sold should be reflected in the U.S. dollar income statement.
Cost of goods sold
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