Case 8-2 Palmerstown Company Palmerstown company established asubsidiary in a foreign country on Janu investing 8,000,000 pounds when the exchange rate was $1.00 Palmerstown negotiated a bank loan of 4,000,000 pounds on January 5, Ye purchased plant and equipment in the amount of 10,000,000 pounds on J Year 1. Plant and equipment is depreciated on straight-line over a useful life. The first purchase of inventory in the amount of pounds was made on January 10, Year 1. Additional inventory of 12,000,000 pounds acquired at three points in time during the year at an average exchange rate of $0.86/pound. Inventory on hand at year-end was acquired when the exchange was $0.83/pound. The first-in, first-out method is used to determine rate cost of goods sold. Additional exchange rates for the pound during Year 1 are as follows: January 1-31, Year 1 $1.00 Average Year 1 December 31, Year 1 0.80