Hamilton Company (a U.S. based company) acquired 100% of a Swiss company, Franco AG, for 8.2 million Swiss francs on December 30, Year 1. At the date of acquisition the exchange rate was $0.70 per franc. The acquisition price is attributable to the flowing assets and liabilities denominated in Swiss francs: Cominon Stock 8,200,000 Cash Inventory (@cost) Fixed Assets Notes Payable 1,000,000 2,000,000 7,000,000 (1,800,000) Hamilton Corporate prepares consolidated financial statements on December 31, Year 1. By that date, the Swiss franc appreciated to $0.75. Because of the year end holidays, no transactions took place between the date of acquisition and the end of the year. Assignment: 1. Determine the translation adjustment to be reported on Hamilton's December 31, Year 1 consolidated financial statements, assuming that the Swiss franc is the Swiss subsidiary's functional currency. Where would the adjustment be located in the financial statements? 2. Determine the translation adjustment to be reported on Hamilton's December 31, Year 1 consolidated financial statements, assuming that the U.S. dollar is the Swiss subsidiary's functional currency. Where would the adjustment be located in the financial statements? Balance Sheet Exchange Rate under Current Method Exchange Rate under Temporal Method Assets Cash and receivables Current Current Marketable securities Current Current * Inventory (@mkt) Current Current Inventory (@cost) Current Historical Prepaid expense Current Historical PPE Current Historical Intangibles Current Historical Liabilities Current liabilities Current Current Deferred income Current Historical Long-term debt Current Current Stockholders' Equity Capital stock Historical Historical Add. Paid-in-capital Historical Historical Retained earnings Historical Historical Dividends Historical Historical * Marketable securities carried at cost are held at "Historical" cost Income Statement Exchange Rate under Current Method Exchange Rate under Temporal Method Revenues Most expenses COGS Depreciation on PPE Amortization of intangibles Average Average Average Average Average Historical Averag Historical Average Historical