Question

On January 1, Dandu Corporation started a subsidiary in a foreign country. On April 1, the subsidiary purchased inventory at a cost of 120,000 local currency units (LCU). One-fourth of this inventory remained unsold at the end of the year while 40 percent of the liability from the purchase had not yet been paid. The exchange rates for \$1 were as follows:
January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . \$1 = LCU 2.5
April 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 = 2.8
Average for the current year . . . . . . . . . . . . . 1 = 2.7
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . 1 _ 3.0
What should be the December 31 Inventory and Accounts Payable balances for this foreign subsidiary as translated into U.S. dollars using the current rate method?

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