Problem - Placo Ltd., a Scottish subsidiary of Limko, Inc., a U.S. company, showed cost of goods sold on its income statement for the year ended December 31, 2010. Purchases were made evenly throughout the year. Ending inventory was purchased on 12/31.
Inventory, 1/1/10 £ 100,000
Purchases 900,000
Cost of Goods Available for Sale 1,000,000
Inventory, 12/31/10 200,000
Cost of Goods Sold £ 800,000
Exchange rates/£
December 31, 2010 $0.522
December 31, 2009 $0.560
2010 average $0.547
a. What amount should be used to consolidate Placo's cost of goods sold into Limko's income statement under the current rate method?
b. What amount should be used to consolidate Placo's cost of goods sold into Limko's income statement under the temporal method?