Question

Shopwell is a U.K. grocery chain that is a subsidiary of Premium Products, a U.S. company....

Shopwell is a U.K. grocery chain that is a subsidiary of Premium Products, a U.S. company. Premium’s scal year ends January 31. On February 1, 2015, Shopwell’s inventory balance consisted of £100,000 purchased when the ex-change rate was $1.60/£, and £300,000 purchased when the exchange rate was $1.62/£. Shopwell made purchases of £5,000,000 evenly throughout scal 2016, and its inventory on January 31, 2016, consisted of £350,000 purchased when the exchange rate was $1.67/£. Shopwell’s sales of inventory occurred relatively evenly throughout scal 2016. The average exchange rate for scal 2016 was $1.64/£, and the January 31, 2016, exchange rate was $1.70/£.

Required

a. Assume that Shopwell’s functional currency is the pound. Calculate Shopwell’s translated ending inventory at January 31, 2016, and its translated cost of sales for scal 2016.

b. Now assume that Shopwell’s functional currency is the U.S. dollar. Calculate Shopwell’s remeasured ending inventory at January 31, 2016, and its remeasured cost of sales for scal 2016

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