5. Productos Montevideo, S.A. (A). Montevideo Products, S.A., is the Uruguayan subsidiary of a U.S. manufacturing company. Its balance sheet for January 1 follows. The January 1 exchange rate between the U.S. dollar and the peso Uruguayo ($U) is $U20/US$.

a. Determine Montevideo's contribution to the translation exposure of its parent on January 1, using the current rate method.

b. Calculate Montevideo's contribution to its par- ent's translation loss if the exchange rate on December 31 is $U20/US$. Assume all peso Uruguayo accounts remain as they were at the beginning of the year.

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Montevideo Products, S.A. Balance Sheet, January 1, thousands of pesos Uruguayo Assets Liabilities and Net Worth Current Cash $U 60,000 liabilities $U 30,000 Accounts Long-term receivable 120,000 debt 90,000 Inventory 120,000 Capital stock 300,000 Net plant and Retained equipment 240,000 earnings 120,000 $U 540,000 $U 540,000