Question

Newberry, Inc., whose reporting currency is the U.S. dollar, has a subsidiary in Argentina, whose functional currency also is the U.S. dollar. The subsidiary acquires inventory on credit on November 1, 2020, for 100,000 pesos that is sold on January 17, 2021, for 130,000 pesos. The subsidiary pays for the inventory on January 31, 2021. Currency exchange rates are as follows:
November 1, 2020 $0.16 = 1 peso
December 31, 2020 0.17 = 1
January 17, 2021 0.18 = 1
January 31, 2021 0.19 = 1
What value does Newberry’s consolidated balance sheet report for this inventory at December 31, 2020?
a.$16,000
b. $17,000
c.$18,000
d. $19,000

Answer 1

Answer:

The correct answer to this multiple choice is option B- $17,000

The Newberry's consolidated balance sheet report for this inventory on December 31, 2020, is $17,000.

Currency Exchange is a licensed business that allows customers to exchange one currency for another.

Currency Exchange rate for December 31 ,2020 is $0.17 = 1 Peso.

Initial amount in the inventory on November 1, 2020 is 100,000 pesos that is sold on January 17, 2021 for 130,000 pesos.

In order to find out the value U.S value of amount on December 31, 2020, we have to multiply the Currency Exchange rate of that particular day to the initial amount.

0.17 × 100,000 = $17,000.

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