Remeasurement and Translation of Cost of Goods Sold
Duff Company is a subsidiary of Rand Corporation and is located in Madrid, Spain, where the currency is the Euro (€). Data on Duffs inventory and purchases are as follows:
Inventory, January 1, 20×7 | €220,000 |
Purchases during 20×7 | €846,000 |
Inventory, December 31, 20×7 | €180,000 |
The beginning inventory was acquired during the fourth quarter of 20X6, and the ending inventory was acquired during the fourth quarter of 20X7. Purchases were made evenly over the year. Exchange rates were as follows:
Fourth quarter of 20×6 | €1 | = $1.29015 |
January 1, 20×7 | €1 | = $1.32030 |
Average during 20×7 | €1 | = $1.39655 |
Fourth quarter of 20×7 | €1 | = $1.45000 |
December 31, 20×7 | €1 | = $1.47280 |
Required
a.Show the remeasurement of cost of goods sold for 20X7, assuming that the U.S. dollar is the functional currency.
b.Show the translation of cost of goods sold for 20X7, assuming that the Spanish peseta is the functional currency.
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