Zesto Company (a U.S. company) establishes a subsidiary in Mexico on January 1, Year 1. The subsidiary

Question:

Zesto Company (a U.S. company) establishes a subsidiary in Mexico on January 1, Year 1. The subsidiary begins the year with 1,000,000 Mexican pesos (MXN) in cash and no other assets or liabilities. It immediately uses MXN600,000 to acquire equipment. Inventory costing MXN300,000 is acquired evenly throughout the year and sold for Mex$500,000 cash. A of MXN100,000 is paid to the parent on October 1, Year 1. Depreciation on the equipment for the year is MXN60,000. Currency exchange rates between the U.S. dollar and MXN for Year 1 are as follows:
January 1 …………………... U.S.$0.090
October 1 ………………….0.080
December 31 ………………0.078
Average for the year ………0.085

Required:
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