Question

A U.S. company's foreign subsidiary had the following amounts in stickles (§) in 2013: COGS § 12,000,000 Ending Inventory 600,000 Beg. inventory 240,000 The average exchange rate during 2013 was §1 = $.96. The beginning inventory was acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired when the exchange rate was §1 = $.90. The exchange rate at December 31, 2013 was §1 = $.84. Assuming that the foreign country had a highly inflationary economy, at what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2013 U.S. dollar income statement? A. $11,253,600. B. $11,577,600. C. $11,649,600. D. $11,613,600. E. $11,523,600. D. $11,613,600. A U.S. company's foreign subsidiary had the following amounts in stickles (§), the functional currency, in 2013: COGS § 12,000,000 Ending Inventory 600,000 Beg. inventory 240,000 The average exchange rate during 2013 was §1 = $.96. The beginning inventory was acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired when the exchange rate was §1 = $.90. The exchange rate at December 31, 2013 was §1 = $.84. At what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2013 U.S. dollar income statement? A. $11,253,600. B. $11,577,600. C. $11,520,000. D. $11,613,600. E. $11,523,600.

Answer 1

Answer:

Option (D)

Explanation:

According to the scenario, computation of the given data are as follow:-

Particular            Amount  × Exchange rate    Total value after exchange rate

Cost of goods sold 12,000,000    

Add-ending inventory 600,000 × 0.9                   $540,000

Less-opening inventory 240,000 × 1.2           $288,000

Purchase  12,360,000 × 0.96                   $11,865,600

   

Cost of Goods Sold After Exchange Rate = Purchase - Ending Inventory + Opening Inventory

= $11,865,600 - $540,000 + $288,000

= $11,613,600

According to the analysis, option (D) $11,613,600 is correct.