Question

At the end of 2020, an italian subsidiary of a U.S. parent reports 1000000 euros in equipment purchased when the exchange rate was $.140, and 3000000 euros in equipment purchased when the exchange rate was $1.50. The avrage exchange rate for 2020 is $1.35, and the beginning and ending rates for 2020 are $1.42 and $1.31, respectively. If the Italian subsidiary's functional currency is the U.S. dollar, the equipment account, in U.S. dollars is

Answer 1

Answer: $5,900,000

Explanation:

If If the Italian subsidiary's functional currency is the U.S. dollar, the equipment account, in U.S. dollars will be calculated as:

Equipment purchased = € 1000000

Exchange rate = $1.40

Amount in dollars = $1,400,000

Equipment purchased = € 3000000

Exchange rate = $1.50

Amount in dollars = $4,500,000

Therefore, the equipment account, in U.S. dollars will be:

= $1,400,000 + $4,500,000

= $5,900,000