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

$1.11001.1100/euro

to

$0.87000.8700/euro.

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,

a. What is the amount of translation gain or loss?

b. Where should it appear in the financial statements?

Data Table EXHIBIT 11.5 Ganado Europe's Translation Loss After Depreciation of the Euro: Current Rate Method December 31, 2015 January 2, 2016 Exchange Rate Translated Exchange Rate Translated Assets In Euros () (US$/euro) Accounts (US$) (US$/euro) Accounts (US$) Cash 1,500,000 1.1100 $1,665,000 0.8700 $1,305,000 Accounts receivable 3,100,000 1.1100 3,441,000 0.8700 2,697,000 Inventory 2,800,000 1.1100 3,108,000 0.8700 2,436,000 Net plant and equipment 4,800,000 1.1100 5,328,000 0.8700 4.176.000 Total 12,200,000 $13,542,000 $10,614,000 Liabilities and Net Worth Accounts payable 900,000 1.1100 $999,000 0.8700 $783,000 Short-term bank debt 1,900,000 1.1100 2,109,000 0.8700 1,653,000 Long-term debt 1,000,000 1.1100 1,110,000 0.8700 870,000 Common stock 2,200,000 1.1690 2,571,800 1.1690 2,571,800 Retained earnings 6,200,000 1.1100 (a) 6,882,000 1.1100 (b) 6,882,000 Translation adjustment (CTA) (129,800) (2,145,800) Total 12,200,000 $13,542,000 $10,614,000 (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