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: ?

$\begin{array}{l}
\text { Jan. 1, 2005}&1 \text { euro }=\$ 1.40 \text { U.S. } \
\text { Dec. 31,2005}&1 \text { euro }=\$ 1.53 \text { U.S. } \
\text { 2005 average}&1 \text { euro }=\$ 1.45 \text { U.S. }
\end{array}$ Determine the re-measurere-measured 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: ?

$\begin{array}{l}
 \text { Jan. 1, 2005}&1 \text { euro }=\$ 1.40 \text { U.S. } \
 \text { Dec. 31,2005}&1 \text { euro }=\$ 1.53 \text { U.S. } \
 \text { 2005 average}&1 \text { euro }=\$ 1.45 \text { U.S. }
\end{array}$ Determine the re-measurere-measured 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

The correct answer is A.The re-measured value of Rhante's inventory is $72,500. This is calculated by multiplying the ending inventory at cost by the average exchange rate for the year. The average exchange rate for the year is $1.45 per euro. Therefore, the re-measured value of the inventory is 50,000 euros * $1.45 per euro = $72,500.

Rhante Is a German Company Wholly Owned by a U