Global Enterprises is a recently acquired U.S. manufacturing subsidiary located in Zonolia. Its products are marketed principally in Zonolia with sales invoiced in zonolias, the local currency (FC) and prices determined by local competitive conditions. Expenses (labor, materials, and other production costs) are mostly local although a significant quantity of components is imported from the U.S. parent. Financing is primarily in U.S. dollars and provided by the parent.

Financial Statements of Global Enterprise

Balance Sheet 12/31/2003 12/31/2004

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Cash FC 300 c FC 500

Accounts receivable (net) 1,300 c 1000

Inventories 1,200 h 1,500

Fixed assets (net) 9,000 h 8,000

Total assets FC 11,800 FC 11,000

Accounts payable FC 2,200 c FC 2,400

Long-term debt 4,400 c 3,000

Capital stock 2,000 h 2,000

Retained earnings 3,200 h 3,600

Total liability & OE FC 11,800 FC 11,000

Income Statement Year ended 12/31/2004

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Sales FC 10,000

Expenses:

Cost of sales 5,950

Depreciation (st. line) 1,000

Other 1,493 8,443

Operating income FC 1,557

Income taxes 467

Net income FC 1,090

Note: Capital stock was issued and fixed assets acquired when the exchange rate was FC1 = $.20. Inventories at January 1, 2004 were acquired during the fourth quarter of 2003. Purchases (FC 6,250), sales other expenses and dividends (FC690) occurred evenly during 2004. Retained earnings in US dollars at December 31, 2003, under the temporal method, were $526; under current rate method, $796. Global Enterprises beginning-of-period cumulative translation adjustment was $270. Relevant exchange rates were: January 1, 2004

FC1 = $.23 December 31, 2004

FC1 = $.18 Average during 2004

FC1 = $.22 Average during 4th qtr., 2003

FC1 = $.23 Average during 4th qtr., 2004

FC1 = $.19

REQUIRED:

1. Remeasure the financial statement using Temporal Method.

2. Remeasure the financial statement using Current Method