The 2010 financial statement of Child Co. Inc (Mexico), a subsidiary of Parent C
ID: 2500011 • Letter: T
Question
The 2010 financial statement of Child Co. Inc (Mexico), a subsidiary of Parent Co. Inc (United States), reveals the following information:
Beginning Inventory Peso 100,000
Purchases Peso 500,000
Ending Inventory Peso 150,000
COGS Peso 450,000
US dollar exchange rate for 1 Peso:
January 1, 2010 $0.45
Average, 2010 $0.42
December 31, 2010 $0.38
The beginning inventory was acquired when the exchange rate was $0.50 last quarter of 2009; ending inventory was acquired when the exchange rate was $0.40 last quarter of 2010.
1. Report amounts of ending inventory and cost of goods sold to be included in the consolidated financial statements under (1) Current rate method and (2) Temporal method.
Explanation / Answer
Current Rate Method Ending Inventory will be valued at the rate at which it is acquired = 60000 $ Cost of Goods Sold being an income statement item, will be valued at the closing exchange rate = 171000 $ Temporal Method Ending Inventory will be valued at the closing exchange rate = 57000 $ Cost of Goods Sold will be valued at the averate exchange rate of 2010 = 189000 $
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