A U.S. companys foreign subsidiary had these amounts in foreign currency units (FCU) in 2011: Cost of

Question:

A U.S. company’s foreign subsidiary had these amounts in foreign currency units (FCU) in 2011:

Cost of goods sold . . . . . . . . . . . . . . . FCU 10,000,000

Ending inventory . . . . . . . . . . . . . . . . 500,000

Beginning inventory . . . . . . . . . . . . . . 200,000

The average exchange rate during 2011 was $0.80 = FCU 1. The beginning inventory was acquired when the exchange rate was $1.00 = FCU 1. Ending inventory was acquired when the exchange rate was $0.75 = FCU 1. The exchange rate at December 31, 2011, was $0.70 = FCU 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. $7,815,000.

b. $8,040,000.

c. $8,065,000.

d. $8,090,000.

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...