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
icon
Related questions
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

Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
International Financial Management
International Financial Management
Finance
ISBN:
9780357130698
Author:
Madura
Publisher:
Cengage