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Question: A U.S. company’s foreign subsidiary


A U.S. company’s foreign subsidiary had these amounts in local currency units (LCU) in 2020:



A U.S. company’s foreign subsidiary had these amounts in -1

The average exchange rate during 2020 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, 2020, 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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