Hello. I need help in further understanding this problem:

- How do you get the correct answer?

- Why would you use the average rate of $1.00 for purchases?

- How does the country being "highly inflationary" influence the answer of this problem?

12. A U.S. company's foreign subsidiary had these amounts in local currency units (LCU) in 2017: Cost of goods sold Beginning inventory Ending inventory.. LCU 5,000,000 500,000 600,000 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 1. Assuming that the foreign country is highly inflationary, at what amount should the foreign subsidiary's cost of goods sold be reflected in the U.S. dollar income statement? a. $4,440,000. b. $4,840,000. c. $5,000,000. d. $5,750,000