# schweser book6: P1: AM: Q15

for temporal method, is inventory translated by using historical rate? the solution gave a mix, by using average rate for begning/ending balance, and historical rate for purchase… is the right way to do so? Thanks.

my understanding is that beginning inventory is translated at historical, purchases are translated at average, and ending inventory is translated at average.

yes, inventory is translated at historical rate…unless the question says something like “inventory was bought evenly throughout the year”

yes, the book is correct; it is a little confusing but beginning inventory is measured at historical rate, purchases are asssumed to occur evently throughout the year - so average rate

if say" evently throughout the year", they always use historical rate? Thanks. jen_ny Wrote: ------------------------------------------------------- > yes, the book is correct; it is a little confusing > but beginning inventory is measured at historical > rate, purchases are asssumed to occur evently > throughout the year - so average rate

if it says evenly throughout the year, approximate the “historical” rate for each inventory purchase using the average

hw0799 Wrote: ------------------------------------------------------- > if say" evently throughout the year", they always > use historical rate? Thanks. > > jen_ny Wrote: > -------------------------------------------------- > ----- > > yes, the book is correct; it is a little > confusing > > but beginning inventory is measured at > historical > > rate, purchases are asssumed to occur evently > > throughout the year - so average rate For Temporal: Everything related to inventory is translated at historical rate, when i say historical rate it means the rate at which transaction was done. Now take the case of FIFO (assuming there is only one period for which translation needs to be done, means you will assume beg. period rate as historical rate): 1. Beginning inventory is provided and it needs to be translated at its historical rate. Then we can use beg. period rate. 2. Purchases, if you have rates for each and every transaction use that to convert or else use average rate for purchases. 3. Ending inventory: since this is FIFO accounting the beginning inventory is alread gone into COGS whats left is the inventory we purchased this year. Since we have already used average rate for purchases, we use that for ending inventory. Things will change for LIFO.

thanks! what will happen for LIFO? Thanks. if things is too complicated for LIFO and not testable on the exam, it will be great! I am kidding kabhii Wrote: ------------------------------------------------------- > hw0799 Wrote: > -------------------------------------------------- > ----- > > if say" evently throughout the year", they > always > > use historical rate? Thanks. > > > > jen_ny Wrote: > > > -------------------------------------------------- > > > ----- > > > yes, the book is correct; it is a little > > confusing > > > but beginning inventory is measured at > > historical > > > rate, purchases are asssumed to occur evently > > > throughout the year - so average rate > > For Temporal: > > Everything related to inventory is translated at > historical rate, when i say historical rate it > means the rate at which transaction was done. > > Now take the case of FIFO (assuming there is only > one period for which translation needs to be done, > means you will assume beg. period rate as > historical rate): > > 1. Beginning inventory is provided and it needs to > be translated at its historical rate. Then we can > use beg. period rate. > > 2. Purchases, if you have rates for each and every > transaction use that to convert or else use > average rate for purchases. > > 3. Ending inventory: since this is FIFO accounting > the beginning inventory is alread gone into COGS > whats left is the inventory we purchased this > year. Since we have already used average rate for > purchases, we use that for ending inventory. > > Things will change for LIFO.