How should Southwestern report each of these three assets on its current balance sheet? Does the company have a gain because the value of the vilsek has increased relative to the US dollar?

Discussion Question How DO WE REPORT THIS? Southwestern Corporation operates throughout Texas buying-and selling widgets. To expand the company rfecenty decided to o enr aome time, the govern- into more profitable markets, the compan company recently decided to open a smail subsidiary in the nearby country of Gualos. The currency in Gualos is the vilsek Forsome time, the govern- ment of that country held the exchange rate constant: 1 vilsek equaled so.20 (or 5 vilseks equaled $1.00), Initially, Southwestern invested cash in thisi new operation, its $90,000 wa converted into 450.000 vilseks ($90,000 S, southwestern used one-third of this money (150.000 vilseks, or $30.000 to purcnase land to hoid for the possible construction of a plant. invested one-third in short-term marketable securities, and spent one third in acquiring inven tory for future resale Shortly thereafter, the Gualos government officially revalued the currency so that 1 vilsek was worth $0.23. Because of the strength of the local economy, the vitsek gained buying power in elation to the U.S. dollar. The visek then wes considered more vaiuable than in the past. South western's accountants reaized that a change had oscurrecas each ofthe assets(land, inventory (land, inventory and marketable securities) was now worth more in uS dollars than the original $30,000 invest- ment 150,000 vilseks x $0.23s: $34,500. Two of the company's top officers met to determi the appropriate method for reporting this change in currency values ontroller:. Nothing has changed. Our cost is still $30.000 for each item. That's what we pent. Accounting uses historical cost wherever possible. Thus, we should do nothing inonce director: Yes, but the old rates are meaninglss now. We would be foolish to report