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

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter10: Measuring Exposure To Exchange Rate Fluctuations

Section: Chapter Questions

Problem 1IEE

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Cost of goods sold	LCU 5,420,000
Beginning inventory	550,000
Ending inventory	603,000

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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