The Year 1 financial statements of the Brazilian subsidiary of Artemis Corporation (a Canadian company) revealed the following:
Brazilian Reals (BRL)
Beginning inventory ………………………….. 100,000
Purchases …………………………………….. 500,000
Ending inventory …………………………….. 150,000
Cost of goods sold …………………………… 450,000
Canadian dollar (C$) exchange rates for 1 BRL are as follows:
January 1, Year 1 ………………………….. C$0.45
Average, Year 1 …………………………… 0.42
December 31, Year 1 ……………………… 0.38
The beginning inventory was acquired in the last quarter of the previous year, when the exchange rate was C$0.50 = BRL 1; ending inventory was acquired in the last quarter of the current year, when the exchange rate was C$0.40 = BRL 1.
Required:
a. Assuming that the current rate method is the appropriate method of translation, determine the amounts at which the Brazilian subsidiary's ending inventory and cost of goods sold should be included in Artemis's Year 1 consolidated financial statements.
b. Assuming that the temporal method is the appropriate method of translation, determine the amounts at which the Brazilian subsidiary's ending inventory and cost of goods sold should be included in Artemis's Year 1 consolidated financial statements.