Essco Ltd, a foreign subsidiary of Peako Corp., has written down its inventory to current market value under a “lower of cost or market” rule. When consolidating Essco’s balance sheet into Peako’s balance sheet, what exchange rate should be used for the inventory under the temporal method?
A. historical rate
B. current rate
C. average rate
D. cannot be determined with the information given
Answer:B
Essco Ltd, a foreign subsidiary of Peako Corp., has written down its inventory to current market value under a “lower of cost or market” rule. When consolidating Essco’s balance sheet into Peako’s balance sheet, what exchange rate should be used for the inventory under the temporal method?
A. historical rate B. current rate C. average rate D. cannot be determined with the information given