THE FOREIGN CASH CASE (PART II) Buying or selling? Americo's controller walked into his office on...

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THE FOREIGN CASH CASE (PART II) "Buying or selling?" Americo's controller walked into his office on Monday morning to find his phone ringing. "That you, Elwood?" the caller asked. Immediately recognizing the gravelly voice as that of Bertrand Bigbucks, Americo's CEO, Elwood replied, somewhat anxiously, "Sure is, Chief! What can I do for you this fine day?" "I was looking at those numbers that your department prepared regarding the translation of that moola we're holding into dollars. Near as I can tell, your staff seems to think there's only one spot rate, but I know there are two quoted - the rate the banks buy foreign cash at and the one they sell it at. Which one did they use here?" "Neither one, Chief," Elwood responded. "Rather than complicate matters, they averaged the two rates on each date and used that." "Tarnation!" Bigbucks thundered. "You number crunchers have a fixation about averaging. Most everything coming out of your department is averaged. So you're telling me that the numbers I see here are not based on the real rates at all am I right?" " Elwood swallowed hard. "Well, yes, Chief, I guess so..." "I want those translations to be based on the real spot rates and I want them now," Bigbucks interrupted. "Those averages don't correspond to anything." "Sure thing, Chief. Have them to you in a few minutes," Elwood replied. Check ing his work papers, Elwood found the data the averages were based on, which were as follows: December 1 Buying rate Selling rate M = $0.68 December 15 M = $0.61 December 31 M = $0.64 M = $0.70 M = $0.63 M = $0.66 Scratching his head, Elwood remembered the reason that he and his staff decided to use averages was that they couldn't agree on which rate to use on each date. How should Americo translate the M1,000,000 on its year-end balance sheet? THE FOREIGN CASH CASE (PART II) "Buying or selling?" Americo's controller walked into his office on Monday morning to find his phone ringing. "That you, Elwood?" the caller asked. Immediately recognizing the gravelly voice as that of Bertrand Bigbucks, Americo's CEO, Elwood replied, somewhat anxiously, "Sure is, Chief! What can I do for you this fine day?" "I was looking at those numbers that your department prepared regarding the translation of that moola we're holding into dollars. Near as I can tell, your staff seems to think there's only one spot rate, but I know there are two quoted - the rate the banks buy foreign cash at and the one they sell it at. Which one did they use here?" "Neither one, Chief," Elwood responded. "Rather than complicate matters, they averaged the two rates on each date and used that." "Tarnation!" Bigbucks thundered. "You number crunchers have a fixation about averaging. Most everything coming out of your department is averaged. So you're telling me that the numbers I see here are not based on the real rates at all am I right?" " Elwood swallowed hard. "Well, yes, Chief, I guess so..." "I want those translations to be based on the real spot rates and I want them now," Bigbucks interrupted. "Those averages don't correspond to anything." "Sure thing, Chief. Have them to you in a few minutes," Elwood replied. Check ing his work papers, Elwood found the data the averages were based on, which were as follows: December 1 Buying rate Selling rate M = $0.68 December 15 M = $0.61 December 31 M = $0.64 M = $0.70 M = $0.63 M = $0.66 Scratching his head, Elwood remembered the reason that he and his staff decided to use averages was that they couldn't agree on which rate to use on each date. How should Americo translate the M1,000,000 on its year-end balance sheet?