A Philippine company a foreign subsidiary on January 1, 20x4. The subsidiary's trial balances for January 1 and December 31, 20x4 one presented below, in foreign currencies. January 1, 20x4 December 31, 20x4 balances Dr (Cr) balances Dr (Cr) Cash receivables FC 37,000 FC 20,000 Plant and equipment, net 400,000 435,000 Liabilities (172,000) (165,000) Capital Stock (115,000) (115,000) Retained Earnings, Jan 1 (150,000) (150,000) Dividends 10,000 Sales revenue (800,000) Operating expenses 765,000 Total FC -0- FC -0- New plant and equipment of FC85,000 was acquired in 20x4. Operating expenses include FC50,000 of depreciation on plant and equipment, of which FC5,000 is related to plant and equipment purchased in 20x4. Exchange rate (P/FC) are as follows: January 1, 20x4 1.45 Plant and equipment acquired 1.40 Average for 20x4 1.30 Dividends declared 1.26 December 31, 20x4 1.25 What is the translation gain or loss for 20x4?

A Philippine company a foreign subsidiary on January 1, 20x4. The subsidiary's trial balances for January 1 and December 31, 20x4 one presented below, in foreign currencies. January 1, 20x4 December 31, 20x4 balances Dr (Cr) balances Dr (Cr) Cash receivables FC 37,000 FC 20,000 Plant and equipment, net 400,000 435,000 Liabilities (172,000) (165,000) Capital Stock (115,000) (115,000) Retained Earnings, Jan 1 (150,000) (150,000) Dividends 10,000 Sales revenue (800,000) Operating expenses 765,000 Total FC -0- FC -0- New plant and equipment of FC85,000 was acquired in 20x4. Operating expenses include FC50,000 of depreciation on plant and equipment, of which FC5,000 is related to plant and equipment purchased in 20x4. Exchange rate (P/FC) are as follows: January 1, 20x4 1.45 Plant and equipment acquired 1.40 Average for 20x4 1.30 Dividends declared 1.26 December 31, 20x4 1.25 What is the translation gain or loss for 20x4?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 26PC

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Given the following balance sheet of a US based MNC’s fully operational subsidiary, who operates in Japan and whose functional currency is the Japanese Yen, determine the amount of the translation exposure in dollars if the Yen depreciates by 10% from ¥110/$ to ~¥122/$ by applying the current rate method. Balance Sheet of Subsidiary in ¥ Assets Liabilities + Equity Cash ¥145,000 Accounts Payable ¥246,000 A/R ¥104,000 Short Term Debt ¥128,000 Inventory ¥275,000 Long term debt ¥329,000 PPE ¥895,000 Common Stock ¥534,000 Retained Earnings ¥182,000 Total ¥1,419,000 ¥1,419,000
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