Ganado Europe (A). Using facts in the chapter for Ganado Europe, assume the exchange rate on January 2, 2016, in Exhibit 11.5 dropped in value from $1.2000/€ to $0.9000/E. Recalculate Ganado Europe's translated balance sheet for January 2, 2016, with the new exchange rate using the curent rate method as shown in the popup window, 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.)
Ganado Europe (A). Using facts in the chapter for Ganado Europe, assume the exchange rate on January 2, 2016, in Exhibit 11.5 dropped in value from $1.2000/€ to $0.9000/E. Recalculate Ganado Europe's translated balance sheet for January 2, 2016, with the new exchange rate using the curent rate method as shown in the popup window, 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.)
Chapter4: Exchange Rate Determination
Section: Chapter Questions
Problem 3IEE
Related questions
Question
Transcribed Image Text:Ganado Europe (A). Using facts in the chapter for Ganado Europe, assume the exchange rate on January 2, 2016, in Exhibit 11.5 dropped in value from
$1.2000/€ to $0.9000/€. Recalculate Ganado Europe's translated balance sheet for January 2, 2016, with the new exchange rate using the current rate method as
shown in the popup window, E
a. What is the amount of translation gain or loss?
b. Where should it appear
a the financial statements?
a. What is the amount of translation gain or loss? Enter a positive number for a gain and negative for a loss.
(Round to the nearest dollar.)
Transcribed Image Text:EXHIBIT 11.5 Ganado Europe's Translation Loss After Depreciation of the Euro: Current Rate Method
December 31, 2015
Translated
Accounts (US$)
January 2, 2016
Exchange Rate
(US$leuro)
Translated
Exchange Rate
(US$leuro)
In Euros (€)
1,600,000
Assets
Accounts (US$)
Cash
$1,920,000
3,840,000
1.2000
0.9000
$1,440,000
Accounts receivable
3,200,000
1.2000
0.9000
2,880,000
Inventory
Net plant and equipment
2,400,000
1.2000
2,880,000
0.9000
2,160,000
4,800,000
1.2000
5,760,000
0.9000
4,320,000
Total
12,000,000
$14,400,000
$10,800,000
Liabilities and Net Worth
Accounts payable
800,000
1,600,000
1,600,000
1.2000
$960,000
0.9000
$720,000
1,440,000
Short-term bank debt
1.2000
1,920,000
0.9000
1,920,000
2,296,800
Long-term debt
1.2000
0.9000
1,440,000
Common stock
1,800,000
1.2760
1.2760
2,296,800
Retained earnings
6,200,000
1.2000 (a)
7,440,000
1.2000 (b)
7,440,000
(136,800)
$14,400,000
Translation adjustment (CTA)
(2,536,800)
$10,800,000
Total
12,000,000
(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.
Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet.
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