A Foreign Subsidiary Uses the First-In First-Out Inventory Method $\text { The following exchange rates are given for } 2011$

question 44

Multiple Choice

A foreign subsidiary uses the first-in first-out inventory method. The following inventory balances are given at December 31, 2011 in local currency units (LCU) : $\begin{array}{ll}\text { Inventory at cost } & 320,000 \mathrm{LCU} \\\text { Inventory at replacement cost } & 300,000 \\\text { Inventory at net realizable value } & 420,000 \\\text { Inventory at net realizable value } &\\\text { less normal profit margin }&400,000\end{array}$
$\text { The following exchange rates are given for } 2011$
$\begin{array} { l } \text { \( 4^{\text {th }} \) quarter average, 2011} &\$ 1.43=1 \mathrm{LCU}\\ \text { December 31.2011}&1.42=1 \mathrm{LCU}\\\end{array}$

-Compute the December 31, 2011, inventory balance using the lower of cost or market method under the temporal method.

• A) $429,000.
• B) $457,600.
• C) $596,400.
• D) $568,000.
• E) $426,000.

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenue, indicating the company's actual profitability.

Income Statement

A record detailing a firm's income, costs, and gains during a particular timeframe.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the asset's wear and tear, decay, or decline in value.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired and put into use.