Ganado Europe (B).Using facts in the chapter for Ganado Europe, assume that the exchange rate on January 2, 2011, in Exhibit 11.6 dropped in value from $1.1300/euroto $0.9300/euro. Recalculate Ganado Europe's translated balance sheet for January 2, 2011, with the new exchange rate using the temporal rate method as shown below,

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

b.Where should it appear in the financial statements?

c.Why does the translation loss or gain under the temporal method differ from the loss or gain under the current rate method?

EXHIBIT 11.6 Ganado Europe's Translation Loss After Depreciation of the Euro: Temporal Method
			December 31, 2010	January 2, 2011
Assets	In Euros		Exchange Rate	Translated	Exchange Rate	Translated
	(euro)		(US$/euro)	Accounts (US$)	(US$/euro)	Accounts (US$)
Cash	1,900,000		1.13	$2,147,000	0.93	$1,767,000
Accounts receivable	2,600,000		1.13	2,938,000	0.93	2,418,000
Inventory	2,300,000		1.151	2,647,300	1.151	2,647,300
Net plant and equipment	4,600,000		1.202	5,529,200	1.202	5,529,200
Total	11,400,000			$13,261,500		$12,361,500
Liabilities and Net Worth
Accounts payable	1,200,000		1.13	$1,356,000	0.93	$1,116,000
Short-term bank debt	1,200,000		1.13	1,356,000	0.93	1,116,000
Long-term debt	1,100,000		1.13	1,243,000	0.93	1,023,000
Common stock	2,500,000		1.202	3,005,000	1.202	3,005,000
Retained earnings	5,400,000		1.1778(a)	6,301,500	1.1778(b)	6,301,500
Translation gain (loss)					C	?
Total	11,400,000			$13,261,500		$12,361,500