The British subsidiary of a U.S. company reported cost of goods sold of 75,000 p

Question

The British subsidiary of a U.S. company reported cost of goods sold of 75,000 pounds (sterling) for the current year ended December 31. The beginning inventory was 10,000 pounds, and the ending inventory was 15,000 pounds. Spot rates for various dates are as follows:

Date beginning inventory was acquired         $1.60 = 1pound

Rate at beginning of the year                         $1.58 = 1pound

Weighted average rate for the year                $1.50 = 1pound

Date ending inventory was acquired              $1.45 = 1pound

Assuming the dollar is the functional currency of the British subsidiary, the remeasured amount of cost of goods sold that should appear in the consolidated income statement is:
A. $108,750.
B. $112,500.
C. $114,250.
D. $125,700.

Explanation / Answer

Calculate cost of goods sold should appear in consolidated income statement :

Cost of goods sold = 75000*1.5 = 112500

so answer is b) $112500

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