Question

Q23 Wiese Limited, a foreign subsidiary of U.S. based Wald Inc. operates primarily economically independent from its parent company. When the exchange rate was $1.30 per one British Pound Sterling (£), Wald Limited purchased Inventory for £2,100 pounds. Wald resells one-third of the inventory for £900 when the exchange rate was $1.26 per Pound Sterling and another one-third for £900 when the exchange rate was $1.28 per Pound Sterling. At the end of the reporting period, the exchange rate is $1.29 per Pound Sterling. The parent company applies the current rate method in its process of consolidating the financial results of its subsidiaries with its own financial results.

Wald Inc. reports gross profit associated with its subsidiary in the amount of:

Multiple Choice

• $466.

• $576.

• $526.

• $508.

Answer 1

Calculation of Gross Profit:

Cost of Inventory Purchased=£2100

Exchange Rate ($) =$1.3

Total cost of inventory =$2730

One third inventory sold=£2100/3=£700 Note:£700 sold for £900

Again One third inventory sold=£2100/3=£700 Note: £700 sold for £900

Profit when the exchange raterate($1.26) =£900-£700*$1.26

=£200*$1.26

=$252

Profit when the exchange raterate($1.28) =£900-£700*$1.28

=£200*$1.28

=$256

GROSS PROFIT=$252+$256

=$508

Conclusion:Option D $508.

PLEASE UPVOTE IF YOU FIND THE SOLUTION HELPFUL.

​