EXHIBIT 11.6 Ganado Europe's Translation Loss After Depreciation of the Euro: Temporal Method January 2, 2016 Exchange Rate (US$leuro) 1.6200 December 31, 2015 Exchange Rate (US$leuro) 1.1100 Translated Accounts (US$) $1,332,000 Translated In Euros (€) 1,200,000 Accounts (US$) $1,944,000 Assets Cash Accounts receivable 2,800,000 1.1100 3,108,000 1.6200 4,536,000 Inventory Net plant and equipment 3,285,700 5,337,000 $13,062,700 2,900,000 1.1330 1.1330 3,285,700 4,500,000 11,400,000 1.1860 1.1860 5,337,000 Total $15,102,700 Liabilities and Net Worth Accounts payable 1,200,000 1,800,000 1,300,000 1,900,000 1.1100 $1,332,000 1.6200 $1,944,000 Short-term bank debt 1.1100 1,998,000 1.6200 2,916,000 Long-term debt 1.1100 1,443,000 1.6200 2,106,000 Common stock 1.1860 2,253,400 1.1860 2,253,400 1.1525 (b) Retained earnings Translation gain (loss) 5,200,000 1.1525 (a) 6,036,300 6,036,300 (c) Total 11,400,000 $13,062,700 $15,102,700 (a) Dollar retained earnings before depreciation are the cumulative sum of additions to retained earnings of all prior years, translated to exchange rates in each year. (b) Translated into dollars at the same rate as before depreciation of the euro. (c) Under the temporal method, the translation loss would be closed into retained earnings through the income statement rather
EXHIBIT 11.6 Ganado Europe's Translation Loss After Depreciation of the Euro: Temporal Method January 2, 2016 Exchange Rate (US$leuro) 1.6200 December 31, 2015 Exchange Rate (US$leuro) 1.1100 Translated Accounts (US$) $1,332,000 Translated In Euros (€) 1,200,000 Accounts (US$) $1,944,000 Assets Cash Accounts receivable 2,800,000 1.1100 3,108,000 1.6200 4,536,000 Inventory Net plant and equipment 3,285,700 5,337,000 $13,062,700 2,900,000 1.1330 1.1330 3,285,700 4,500,000 11,400,000 1.1860 1.1860 5,337,000 Total $15,102,700 Liabilities and Net Worth Accounts payable 1,200,000 1,800,000 1,300,000 1,900,000 1.1100 $1,332,000 1.6200 $1,944,000 Short-term bank debt 1.1100 1,998,000 1.6200 2,916,000 Long-term debt 1.1100 1,443,000 1.6200 2,106,000 Common stock 1.1860 2,253,400 1.1860 2,253,400 1.1525 (b) Retained earnings Translation gain (loss) 5,200,000 1.1525 (a) 6,036,300 6,036,300 (c) Total 11,400,000 $13,062,700 $15,102,700 (a) Dollar retained earnings before depreciation are the cumulative sum of additions to retained earnings of all prior years, translated to exchange rates in each year. (b) Translated into dollars at the same rate as before depreciation of the euro. (c) Under the temporal method, the translation loss would be closed into retained earnings through the income statement rather
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter17: Multinational Financial Management
Section: Chapter Questions
Problem 6P
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Transcribed Image Text:EXHIBIT 11.6 Ganado Europe's Translation Loss After Depreciation of the Euro: Temporal Method
December 31, 2015
January 2, 2016
Exchange Rate
(US$leuro)
Translated
Exchange Rate
(US$leuro)
Translated
Assets
In Euros (€)
Accounts (US$)
Accounts (US$)
Cash
1.1100
$1,332,000
3,108,000
$1,944,000
4,536,000
3,285,700
5,337,000
1,200,000
1.6200
Accounts receivable
2,800,000
1.1100
1.6200
Inventory
2,900,000
1.1330
3,285,700
1.1330
Net plant and equipment
4,500,000
1.1860
5,337,000
1.1860
Total
11,400,000
$13,062,700
$15,102,700
Liabilities and Net Worth
Accounts payable
1,200,000
1,800,000
1,300,000
$1,332,000
1,998,000
1.1100
1.6200
$1,944,000
Short-term bank debt
1.1100
1.6200
2,916,000
Long-term debt
1.1100
1,443,000
1.6200
2,106,000
Common stock
1,900,000
1.1860
2,253,400
1.1860
2,253,400
1.1525 (a)
Retained earnings
Translation gain (loss)
1.1525 (b)
(c)
5,200,000
6,036,300
6,036,300
?
|
Total
11,400,000
$13,062,700
$15,102,700
(a) Dollar retained earnings before depreciation are the cumulative sum of additions to retained earnings of all prior years,
translated to exchange rates in each year.
(b) Translated into dollars at the same rate as before depreciation of the euro.
(c) Under the temporal method, the translation loss would be closed into retained earnings through the income statement
rather
Transcribed Image Text:Ganado Europe (D). Using facts in the chapter for Ganado Europe, assume that the exchange rate on January 2, 2016, in Exhibit 11.6 appreciated from
$1.1100/€ to $1.6200/€. Calculate Ganado Europe's translated balance sheet for January 2, 2016, with the new exchange rate using the temporal rate method as
shown in the popup window, E
a. What is the amount of translation gain or loss?
b. Where should it appear in the financial statements?
.....
a. What is the amount of translation gain or loss? Enter a positive number for a gain and negative for a loss.
(Round to the nearest dollar.)
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