Under the temporal method of translating foreign currency financial statements,what exchange rate should be used for cost of goods sold?
A)spot rate at the end of the year
B)average rate during the year
C)spot rate mid-year
D)There is no single rate because beginning and ending inventory must be converted at different exchange rates than purchases.

Question

Quizplus · Accepted Answer

Cost of goods sold is derived from the changes in inventory during the period (beginning inventory + purchases - ending inventory). Beginning and ending inventory is converted at the exchange rate at the respective dates, while purchases are converted at the average exchange rate during the year. Therefore, there is no single exchange rate to be used for cost of goods sold.

Under the Temporal Method of Translating Foreign Currency Financial Statements,what