Scenario: Color-Me-Green, Inc. Color-Me-Green, Inc., a U.S.-Based Clothing Merchant, Has Started Doing Business

question 49

Multiple Choice

Scenario: Color-Me-Green, Inc.
Color-Me-Green, Inc., a U.S.-based clothing merchant, has started doing business internationally. Having subsidiaries in several countries at year-end, the company must integrate the financial information from all its subsidiaries into the U.S. home office.
-Suppose country A has a currency called Pulse (P) . At the beginning of the year, the exchange rate between the Pulse and U.S. dollar was P150/$. The inflation rate in country A is running at an annual rate of 250 percent where as inflation in the U.S. is running 2 percent. What would be the new exchange rate that Color-Me-Green can expect at the end of the year?

• A) P525/$
• B) P514.70/$
• C) P43.71/$
• D) $43.71/P

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Definitions:

Merchandise Purchases

The acquisition of goods that a company intends to sell in its normal course of business; this includes goods bought for resale.

Cost Of Goods

The total direct costs attributable to the production of the goods sold by a company.

Budgeted Sales

Projected or estimated sales for a future period, usually based on past sales data, market analysis, and growth projections.

Master Budget

A comprehensive financial plan for a company's future operations, including multiple subsidiary budgets.