Cairo Ingot, Ltd., is the Egyptian subsidiary of Trans-Mediterranean Aluminum, a British multinational that fashions automobile engine

Question:

Cairo Ingot, Ltd., is the Egyptian subsidiary of Trans-Mediterranean Aluminum, a British multinational that fashions automobile engine blocks from aluminum. Trans-Mediterranean’s home reporting currency is the British pound. Cairo Ingot’s December 31 balance sheet is shown below. At the date of this balance sheet the exchange rate between Egyptian pounds and British pounds sterling was £E5.50/UK£. Cairo Ingot, Ltd., is the Egyptian subsidiary of Trans-Mediterranean Aluminum,

What is Cairo Ingot’s contribution to the translation exposure of Trans-Mediterranean on December 31, using the current rate method? Calculate the translation exposure loss to Trans-Mediterranean if the exchange rate at the end of the following quarter is £E6.00/£. Assume all balance sheet accounts are the same at the end of the quarter as they were at the beginning.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...