Rhante is a German company wholly owned by a U.S. firm. Its inventory is valued at the lower of cost or market, with cost being measured by the average cost method. Purchases of inventory occur evenly throughout the period. In 2005 Rhante's ending inventory was 50,000 euros at cost and 48,000 euros at market. Assume the following exchange rates: Determine the remeasured value of Rhante's inventory to be included in the consolidated balance sheet for the U.S. parent given Rhante's functional currency is the U.S. dollar.

Question

Rhante is a German company wholly owned by a U.S. firm. Its inventory is valued at the lower of cost or market, with cost being measured by the average cost method. Purchases of inventory occur evenly throughout the period. In 2005 Rhante's ending inventory was 50,000 euros at cost and 48,000 euros at market. Assume the following exchange rates:  Determine the remeasured value of Rhante's inventory to be included in the consolidated balance sheet for the U.S. parent given Rhante's functional currency is the U.S. dollar.

Quizplus · Accepted Answer

If the functional currency is the dollar, the remeasurement method should be used. Inventory is stated at cost or market and translated at the historical rate from the date of purchase.FC 50,000 x $1.45 = $72,500

Rhante Is a German Company Wholly Owned by a U