_____ During 2006, Pavlox had intercompany sales to a foreign subsidiary. Pavlox uses the U.S. dollar unit of measure approach. Pavlox should calculate the amount of any unrealized intercompany profit using the
A) Current exchange rate.
B) Average exchange rate.
C) Historical exchange rate.
D) Nominal exchange rate.
E) None of the above.

Question

Quizplus · Accepted Answer

When using the U.S. dollar as the unit of measure, unrealized intercompany profits on transactions with a foreign subsidiary should be calculated using the historical exchange rate. This is because the historical rate reflects the exchange rate at the time the transaction occurred, providing a more accurate measure of the profit or loss at the time of the sale.

_____ During 2006, Pavlox Had Intercompany Sales to a Foreign