39242Charles Edward Company established a subsidiary in a foreign country on January 1, 2020, by investing FC 3,200,000 when the exchange rate was $0.50/FC. Charles Edward negotiated a bank loan of FC 3,000,000 on January 5, 2020, and purchased plant and equipment in the amount of FC 6,000,000 on January 8, 2020. It depreciated plant and equipment on a straight-line basis over a 10-year useful life. It purchased its beginning inventory of FC 1,000,000 on January 10, 2020, and acquired additional inventory of FC 4,000,000 at three points in time during the year at an average exchange rate of $0.43/FC. It uses the first-in, first-out (FIFO) method to determine cost of goods sold. Additional exchange rates per FC 1 during the year 2020 follow: January 1–31, 2020 $ 0.50 Average 2020 0.45 December 31, 2020 0.38.
The foreign subsidiary’s income statement for 2020 and balance sheet at December 31, 2020, follow: (See the attached files for income statement