Cairo Ingot, Ltd. 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 in the following table. At the date of this balance sheet, the exchange rate between Egyptian pounds and British pounds sterling was £E5.50/UK£.

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.

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Assets Cash Liabilities and Net Worth E16,500,000 Accounts payable E24,750,000 Accounts receivable 33,000,000 Long-term debt 49,500,000 Inventory 49,500,000 Invested 90,750,000 capital Net plant and equipment 66,000,000 E165,000,000 E165,000,000