A U.S. companys foreign subsidiary had these amounts in local currency units (LCU) in 2020: Cost of
Question:
A U.S. company’s foreign subsidiary had these amounts in local currency units (LCU) in 2020:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . LCU 5,000,000
Beginning inventory . . . . . . . . . . . . . . . . . . . . 500,000
Ending inventory . . . . . . . . . . . . . . . . . . . . . . . 600,000
The average exchange rate during 2020 was $1.00 = LCU 1. The beginning inventory was acquired when the exchange rate was $0.80 = LCU 1. Ending inventory was acquired when the exchange rate was $1.10 = LCU 1. The exchange rate at December 31, 2020, was $1.15 = LCU 1. Assuming that the foreign country is highly inflationary, at what amount should the foreign subsidiary’s cost of goods sold be reflected in the U.S. dollar income statement?
a. $4,440,000
b. $4,840,000
c. $5,000,000
d. $5,750,000
Step by Step Answer:
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik