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 that can be used for this purpose

Question

Quizplus · Accepted Answer

Under the temporal method, different exchange rates are used for different types of items in the financial statements. For cost of goods sold, there is no single rate that can be used because it represents a mix of inventory items purchased at different times and at different exchange rates. Therefore, the different exchange rates for each inventory purchase must be identified and applied to their respective cost of goods sold amounts.

Under the Temporal Method of Translating Foreign Currency Financial Statements