A U.S. company's foreign subsidiary had the following amounts in stickles (§) 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 country had a highly inflationary economy, at what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2013 U.S. dollar income statement?

Question

A U.S. company's foreign subsidiary had the following amounts in stickles (§) 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 country had a highly inflationary economy, at what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2013 U.S. dollar income statement?

Quizplus · Accepted Answer

Beginning Inventory [(§240,000 × $1.20) $288,000] - Purchases [Beginning Inventory §240,000 - COGS §12,000,000 - Ending Inventory §600,000 = §12,360,000 × $.96 = $11,865,600] - Ending Inventory [(§600,000 × $.90) $540,000] = COGS $11,613,600

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