1. Johnson Controls Corp., a major U.S. auto parts supplier, has a manufacturing subsidiary in Nuevo Laredo Mexico, which assembles wiring harnesses for auto electrical systems. Quarterly, Johnson Controls must consolidate the financial statements of all its foreign subsidiaries into one overall corporate-wide financial statement as required by U.S. accounting standards. This results in translation gains and losses as exchange rates fluctuate against the U.S. dollar. The Mexican peso has been particularly volatile the last few years so the Treasurer of Johnson Controls has been following the translation exposure of the Mexican subsidiary with unusual interest. Prepare the Translation Exposure Report by both the current rate and temporal methods from the balance sheet information for the Mexican subsidiary presented below (all accounts are in pesos 000's). Assets Liabilities Cash Accounts Receivable Inventory Plant & Equipment Ps 5400 8750 12860 25430 Accounts Payable Bank loans Bonds Common Stock Retained Earnings Ps 4600 13800 8370 24000 1670 1. 2. 3. 4. Prepare the Translation Exposure Report for the Mexican subsidiary by the a. current rate method and b. temporal method. What is the translation exposure in USD for the Mexican subsidiary if the current spot rate is Ps 15.6432/S by the a. current rate method and b. temporal method? If the exchange rate is Ps 14.2650/S at the end of the next quarter, what would be the translation gain or loss by the a. current rate method and b. temporal method? If the exchange rate is Ps 16.8455/S at the end of the next quarter, what would be the translation gain or loss by the a. current rate method and b. temporal method