On January 1, Narnevik Corporation formed a subsidiary in a foreign country. On April 1, the subsidiary

Question:

On January 1, Narnevik formed a subsidiary in a foreign country. On April 1, the subsidiary purchased inventory on account at a cost of 250,000 local currency units (LCU). One-fifth of this inventory remained unsold on December 31, while 30 percent of the account payable had not yet been paid. The U.S. $ per LCU exchange rates were as follows:
January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.60
April 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.58
Average for the current year . . . . . . . . . . . . . . . . . . . . . 0.56
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.54
At what amounts should the December 31 balances in inventory and be translated into U.S. dollars using the current rate method?
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