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On November 30, 2020, a U.S. company purchased merchandise on credit from a Swiss supplier at...

On November 30, 2020, a U.S. company purchased merchandise on credit from a Swiss supplier at an invoice price of CHF1,000, when the exchange rate was $1.05/CHF. On December 31, 2020, the company's year-end, the exchange rate was $1.045/CHF. On February 1, 2021, the company purchased the CHF1,000 for $1.048/CHF and paid the invoice. On March 15, 2021, when the exchange rate was $1.044, the company sold the merchandise to a U.S. customer for $2,000.

At what amount should the merchandise be reported on the U.S. company's December 31, 2020 balance sheet?

A.

$1,044
B.

$1,050
C.

$1,048
D.

$1,045
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Answer #1

The correct answer is D) $ 1045

Explaination and calculation

Merchandise reported by the US Company

= Purchase cost in CHF * rate as on December 31,2020 for 1 CHF

= 1000*1.045

= $ 1045

Note at the end of the accounting year current assets are restated using the current exchange rate.

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