Ninsuvaan Corporation, a U S subsidiary in Bangkok, Thailand, begins and ends its calendar year with an inventory balance of BHT500 million The dollar baht exchange rate on January 1 was $0 02 BHT1 During the year, the U S general price level advances from 180 to 198, while the Thai general price l...

a Nominal Thai Historical Translation US baht inflation costconstant rate dol ...

Ninsuvaan Corporation, a U.S. subsidiary in Bangkok, Thailand, begins and ends its calendar year with an inventory

Question:

Ninsuvaan Corporation, a U.S. subsidiary in Bangkok, Thailand, begins and ends its calendar year with an inventory balance of BHT500 million. The dollar/baht on January 1 was $0.02 = BHT1. During the year, the U.S. general price level advances from 180 to 198, while the Thai general price level doubles. The on December 31 was $0.015 = BHT1.

Required:
a. Using the temporal method of translation, calculate the dollar equivalent of the inventory balance by first restating for Thai inflation, then translating to U.S. dollars.
b. Repeat part (a), but translate the nominal baht balances to dollars before restating for U.S. inflation.
c. Which dollar figure do you think provides the more useful information?
d. If you are dissatisfied with either result, suggest a method that would provide more useful information than those in parts (a) and (b).

Exchange rate and price information:
January 1: General price index = 300
EUR1.5 = £1
December 31: General price index = 390
EUR1.95 = £1

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...