A US Company Has a Subsidiary Located in Great Britain

A U.S. company has a subsidiary located in Great Britain. Information for the subsidiary for the year ended December 31, 2006, is as follows:
$\begin{array}{ll}&\text { British pound }\\\text { Gross profit margin } & 40 \% \\\text { Inventory } & 2,000\\\\&\text { Exchange Rate }\\\text { Balance sheet date } & 1 \text { pound }=\$ 1.6 \\\text { Average exchange rate } & 1 \text { pound }=\$ 1.5 \\\text { Historical rate } & 1 \text { pound }=\$ 1.4\end{array}$

-If the British pound was determined to be the functional currency, what would inventory be in US dollars?

A) $3,500
B) $3,200
C) $3,000
D) $2,800

Correct Answer:

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