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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

jeff jeffy answered 1 year ago
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