A U.S. company’s foreign subsidiary had these amounts in local currency units (LCU) in 2017:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . LCU 5,000,000
Beginning inventory . . . . . . . . . . . . . . . . . ………. . 500,000
. . . . . . . . . . . . . . . . . . . . ………. . 600,000
The average during 2017 was $1.00 = LCU 1. The beginning inventory was acquired when the was $0.80 = LCU 1. was acquired when the was $1.10 = LCU 1. The 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.
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