Balaji Corporation of India is an 80 percent-owned subsidiary of Porter Corporat

Question

Balaji Corporation of India is an 80 percent-owned subsidiary of Porter Corporation, a U.S. firm, and its functional currency is the U.S. dollar. Balaji’s books of record are maintained in Rupee and its inventory is carried at the lower of cost or market.

The current exchange rate rupees at Dec. 31, 19X8 is $.48

The historical cost of the inventory is 12,000 Rupees.

The market value of the inventory is 11,000 Rupees.

The historical exchange rate is $.43.

The $ amount of inventory that will be reported in the remeasured statement is:

12,000 * $.43 = $ 5,160

11,000 * $.43 = $ 4,730

12,000 * $.48 = $ 5,760

11,000 * $.48 = $ 5,280

12,000 * $.43 = $ 5,160

11,000 * $.43 = $ 4,730

12,000 * $.48 = $ 5,760

11,000 * $.48 = $ 5,280

Explanation / Answer

Ad per US GAAP to be followed by Porter Corporation, inventory would be valued at lower of cost or fmv i.e. $ 11000. According to U.S. GAAP, monetary assets and liabilities only are updated for reporting purposes using the exchange rate at the date of the balance sheet. Since inventory is not monetory asset or liability, it will be valued at $ 0.43. Therefore answer would be 11000x0.43.

Please appreciate the efforts for explanation if you find the answer correct and helpful. Thanks

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