A US. company’s foreign subsidiary had these amounts in local currency units (LCU) in 2017:

Cost of goods sold.................... LCU 5.000.000

Beginning Inventory................... 500.000

Ending Inventory...................... 600.000

The average exchange rate during 2017 was $1.00 = LCU 1. The beginning inventory was acquired when the exchange rate was $0.80 = LCU 1. Ending inventory was acquired when the exchange rate was $1.10 = LCU 1‘ The exchange rate at December 31, 2017, was $1.15 = LCU

Assuming that the foreign country is highly inflationary, at what amount should the foreign subsidiary’s cost of goods sold be rejected in the US. dollar income statement?

a. $4,440,000.

b. 84,840,000.

c. $5,000,000.

d. 55,750,000.

Answer rating: 100% (QA)

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