Problem 11-2 (algorithmic) Question Help 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 $1.2900/ to $0.8700/. Recalculate Ganado Europe's translated balance sheet for January 2, 2011, with the new exchange rate using the temporal rate method as shown in the popup window, E. a. What is the amount of translation gain or loss? b. Where should it appear in the financial statements? c. Why does the translation loss or gain under the temporal method differ from the loss or gain under the current rate method? In Euros () 1,000,000 3,300,000 2,800,000 4,500,000 11,600,000 December 31, 2010 Exchange Rate Translated (US$/euro) Accounts (US$) 1.2900 $1,290,000 1.2900 4,257,000 1.3070 3,659,600 1.3650 6,142,500 $15,349,100 January 2, 2011 Exchange Rate Translated (US$/euro) Accounts (US$) 0.8700 $870,000 0.8700 2,871,000 1.3070 3,659,600 1.3650 6,142,500 $13,543,100 Assets Cash Accounts receivable Inventory Net plant and equipment Total Liabilities and Net Worth Accounts payable Short-term bank debt Long-term debt Common stock Retained earnings Translation gain (loss) Total 1,300,000 1,900,000 1,500,000 2,400,000 4,500,000 1.2900 1.2900 1.2900 1.3650 1.3309 (a) $1,677,000 2,451,000 1,935,000 3,276,000 6,010,100 0.8700 0.8700 0.8700 1.3650 1.3309 (b) $1,131,000 1,653,000 1,305,000 3,276,000 6,010,100 (c) ? 11,600,000 $15,349.100 $13,543.100 (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. (c) Under the temporal method, the translation loss would be closed into retained earnings through the income statement rather than left as a separate line item as shown here. Print Done Problem 11-2 (algorithmic) Question Help 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 $1.2900/ to $0.8700/. Recalculate Ganado Europe's translated balance sheet for January 2, 2011, with the new exchange rate using the temporal rate method as shown in the popup window, E. a. What is the amount of translation gain or loss? b. Where should it appear in the financial statements? c. Why does the translation loss or gain under the temporal method differ from the loss or gain under the current rate method? In Euros () 1,000,000 3,300,000 2,800,000 4,500,000 11,600,000 December 31, 2010 Exchange Rate Translated (US$/euro) Accounts (US$) 1.2900 $1,290,000 1.2900 4,257,000 1.3070 3,659,600 1.3650 6,142,500 $15,349,100 January 2, 2011 Exchange Rate Translated (US$/euro) Accounts (US$) 0.8700 $870,000 0.8700 2,871,000 1.3070 3,659,600 1.3650 6,142,500 $13,543,100 Assets Cash Accounts receivable Inventory Net plant and equipment Total Liabilities and Net Worth Accounts payable Short-term bank debt Long-term debt Common stock Retained earnings Translation gain (loss) Total 1,300,000 1,900,000 1,500,000 2,400,000 4,500,000 1.2900 1.2900 1.2900 1.3650 1.3309 (a) $1,677,000 2,451,000 1,935,000 3,276,000 6,010,100 0.8700 0.8700 0.8700 1.3650 1.3309 (b) $1,131,000 1,653,000 1,305,000 3,276,000 6,010,100 (c) ? 11,600,000 $15,349.100 $13,543.100 (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. (c) Under the temporal method, the translation loss would be closed into retained earnings through the income statement rather than left as a separate line item as shown here. Print Done
