Question
In: Finance
Assume that the balance sheet and income statement of a French subsidiary, which keeps its books...
Assume that the balance sheet and income statement of a French subsidiary, which keeps its books in euro, is translated into U.S. dollars, the reporting currency of the U.S. MNC.
The table presents the balance sheet and income statement in euro.The subsidiary is at the end of its first year of operation.The historical exchange rate is $1.60/€1.00 and the most recent exchange rate is $2.00/€
Fill out the 20 missing entries that translate the balance sheet and income statement for this French subsidiary using the Current/Noncurrent Method, the Monetary/Nonmonetary Method, the Temporal Method, and the Current Rate Method
| Local Currency | Current/Non current | Monetary/Non monetary | Temporal | Current Rate | ||||||||||||||||||
| Balance Sheet | ||||||||||||||||||||||
| 1 | Cash | € | 2,100 | |||||||||||||||||||
| 2 | Inventory (current Value = €1,800) | € | 1,500 | |||||||||||||||||||
| 3 | Net fixed assets | € | 3,000 | |||||||||||||||||||
| 4 | Total Assets | € | 6,600 | |||||||||||||||||||
| 5 | Current liabilities | € | 1,200 | |||||||||||||||||||
| 6 | Long-term debt | € | 1,800 | |||||||||||||||||||
| 7 | Common stock | € | 2,700 | |||||||||||||||||||
| 8 | Retained earnings | € | 900 | |||||||||||||||||||
| 9 | CTA | |||||||||||||||||||||
| 10 | Total L&E | € | 6,600 | |||||||||||||||||||
| Income Statement | ||||||||||||||||||||||
| 11 | Sales Revenue | € | 10,000 | |||||||||||||||||||
| 12 | COGS | € | 7,500 | |||||||||||||||||||
| 13 | Depreciation | € | 1,000 | |||||||||||||||||||
| 14 | NOI | € | 1,500 | |||||||||||||||||||
| 15 | Tax(40%) | € | 600 | |||||||||||||||||||
| 16 | Profit after tax | € | 900 | |||||||||||||||||||
| 17 | Foreign Exchange gain (loss) | |||||||||||||||||||||
| 18 | Net income | € | 900 | |||||||||||||||||||
| 19 | Dividends | € | 0 | |||||||||||||||||||
| 20 | Addition to Retained Earnings | € | 900 | |||||||||||||||||||
Solutions
Expert Solution
Balance Sheet and Income Statement
|
S.No |
Local Currency |
Current/Non-current |
Monetary/non-monetary |
Temporal |
Current rate |
|
|
1 |
Cash |
€ 2100 |
$1050 |
$1050 |
$1050 |
$1050 |
|
2 |
Inventory Current Value € 1800 |
€ 1500 |
$750 |
$937.5 |
$900 |
$750 |
|
3 |
Net Fixed Assets |
€3000 |
$1875 |
$1875 |
$1875 |
$1500 |
|
4 |
Total Assets |
€6600 |
$3675 |
3862.5 |
3825 |
3300 |
|
5. |
Current Liabilities |
€1200 |
$600 |
$600 |
$600 |
$600 |
|
6 |
Long Term Debt |
€1800 |
$1125 |
$900 |
$900 |
$900 |
|
7 |
Common Stock |
€2700 |
$1687.5 |
$1687.5 |
$1687.5 |
$1687.5 |
|
8 |
Retained Earnings |
900 |
$263 |
$676 |
$638 |
$113 |
|
9 |
CTA |
- |
- |
- |
- |
(112.5) |
|
Total liabilities and Equity |
€6600 |
$3675 |
$3862.5 |
$3825 |
$3300 |
|
|
Income Statement |
||||||
|
1 |
Sales Revenue |
€10000 |
$5556 |
$5556 |
$5556 |
$5556 |
|
2 |
COGS |
€7500 |
4167 |
4688 |
4167 |
4167 |
|
3 |
Depreciation |
€1000 |
625 |
625 |
625 |
556 |
|
4 |
Net Operating Income |
€1500 |
764 |
243 |
764 |
833 |
|
5 |
Income Tax (40%) |
€600 |
306 |
97 |
306 |
333 |
|
6 |
Profit after Tax |
€900 |
458 |
146 |
458 |
500 |
|
Foreign Exchange Gain or loss |
--- |
196 |
530 |
180 |
387 |
|
|
7 |
Net Income |
900 |
$263 |
$676 |
$638 |
$113 |
|
8 |
Dividends |
0 |
0 |
0 |
0 |
0` |
|
9 |
Addition to Retained Earnings |
€900 |
$263 |
$676 |
$638 |
$113 |
Average exchange rate = (1.6+2) / 2 = 1.8
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