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.

Sales0
Views69