A U.S. company's foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2013: The average exchange rate during 2013 was §1 = $.96. The beginning inventory was acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired when the exchange rate was §1 = $.90. The exchange rate at December 31, 2013 was §1 = $.84. Assuming that the foreign nation for the subsidiary had a highly inflationary economy, at what amount should that foreign subsidiary's purchases have been reflected in the 2013 U.S. dollar income statement?
A) $11,865,600.
B) $11,577,600.
C) $11,520,000.
D) $11,613,600.
E) $11,523,600.

Question

A U.S. company's foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2013:  The average exchange rate during 2013 was §1 = $.96. The beginning inventory was acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired when the exchange rate was §1 = $.90. The exchange rate at December 31, 2013 was §1 = $.84. Assuming that the foreign nation for the subsidiary had a highly inflationary economy, at what amount should that foreign subsidiary's purchases have been reflected in the 2013 U.S. dollar income statement?
A) $11,865,600. 
B) $11,577,600. 
C) $11,520,000. 
D) $11,613,600. 
E) $11,523,600.

Quizplus · Accepted Answer

Beginning Inventory §240,000 - COGS §12,000,000 - Ending Inventory §600,000 = Purchases §12,360,000 × $.96 = $11,865,600

A US Company's Foreign Subsidiary Had the Following Amounts in Stickles