Question

Question #20 & 21: The Year 2015 financial statements of the Russian subsidiary of Globe Corporation (a German company) revealed the following: Russian Ruble Beginning Inventory ......... $480,000 Purchases 360,000 Ending Inventory 240,000 Cost of Goods Sold ... 600,000 Euro dollar (€):1 Ruble January 1, 2015 .. Average, 2015.. December 31, 2015 €$ 0.38 0.26 0.32 ............. The beginning inventory was acquired in 4th quarter of the previous year when exchange rate was €$0.45 = 1 Ruble; ending inventory was acquired in 4th quarter of 2015 when exchange rate was €$0.36 = 1 Ruble. 20) Required: Assuming the current rate method is the appropriate method of currency translation, determine the amounts at which the Russian subsidiary's ending inventory and cost of goods sold should be included in Globe's Year 2015 consolidated financial statements. Your response: Ruble X Exchange Rate Euro 21) Required: Assuming the temporal method is the appropriate method of currency translation, determine the amounts at which the Russian subsidiary's ending inventory and cost of goods sold should be included in Globe's Year 2015 consolidated financial statements. Your response: Ruble X Exchange Rate = Euro

Answer 1

20) Current rate method wees . The current rate method uses current exchange nate as on date of financial statement- Therefore, Russial subsidiary's ending inventory in Globe's year 2015 consolidated financial statemest is (Ending invertory & Euro dollar (on Dec. 31, 2015) =) (240,000 * 0.32) eurd dollar = $ 76, 800 Euro dollar Russial subsidiary's cost of goods sold in Globe's Year 2015 consolidated financial statement is (cost of goods sold *0.32) $ 600, 000 + 0.32 = 192,000 Euro dollar - 1 Temporal method. - Temporal method uses exchange rate when the asset was acquired. Therefore, Russial subsidiary's ending inventory in Globes year 2015 consolidated financial statement is ( $240.000 * 0.32) Euro dollar- Russial subsidiary cost of goods sold year 2015 consolidated financial statement Beginning inventory & Purchases - Ending in globe's is: inventory) Euro & > = - = $480.000 * 0.38 + $360,000 * 0.26 - $ 240000*0.32) $ 182,400 Euso dollar + $ 93,600 Euro dollar - $76800 Euros $ 276.000 Euro dolar - $76800 Euro dollar $199,200 Euro dollar