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EXHIBIT 11.6 Ganado Europe's Translation Loss After Depreciation of the Euro: Temporal Method January 2, 2016 Exchange Rate (US$leuro) 1.6200 December 31, 2015 Exchange Rate (US$leuro) 1.1100 Translated Accounts (US$) $1,332,000 Translated In Euros (€) 1,200,000 Accounts (US$) $1,944,000 Assets Cash Accounts receivable 2,800,000 1.1100 3,108,000 1.6200 4,536,000 Inventory Net plant and equipment 3,285,700 5,337,000 $13,062,700 2,900,000 1.1330 1.1330 3,285,700 4,500,000 11,400,000 1.1860 1.1860 5,337,000 Total $15,102,700 Liabilities and Net Worth Accounts payable 1,200,000 1,800,000 1,300,000 1,900,000 1.1100 $1,332,000 1.6200 $1,944,000 Short-term bank debt 1.1100 1,998,000 1.6200 2,916,000 Long-term debt 1.1100 1,443,000 1.6200 2,106,000 Common stock 1.1860 2,253,400 1.1860 2,253,400 1.1525 (b) Retained earnings Translation gain (loss) 5,200,000 1.1525 (a) 6,036,300 6,036,300 (c) Total 11,400,000 $13,062,700 $15,102,700 (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

EXHIBIT 11.6 Ganado Europe's Translation Loss After Depreciation of the Euro: Temporal Method January 2, 2016 Exchange Rate (US$leuro) 1.6200 December 31, 2015 Exchange Rate (US$leuro) 1.1100 Translated Accounts (US$) $1,332,000 Translated In Euros (€) 1,200,000 Accounts (US$) $1,944,000 Assets Cash Accounts receivable 2,800,000 1.1100 3,108,000 1.6200 4,536,000 Inventory Net plant and equipment 3,285,700 5,337,000 $13,062,700 2,900,000 1.1330 1.1330 3,285,700 4,500,000 11,400,000 1.1860 1.1860 5,337,000 Total $15,102,700 Liabilities and Net Worth Accounts payable 1,200,000 1,800,000 1,300,000 1,900,000 1.1100 $1,332,000 1.6200 $1,944,000 Short-term bank debt 1.1100 1,998,000 1.6200 2,916,000 Long-term debt 1.1100 1,443,000 1.6200 2,106,000 Common stock 1.1860 2,253,400 1.1860 2,253,400 1.1525 (b) Retained earnings Translation gain (loss) 5,200,000 1.1525 (a) 6,036,300 6,036,300 (c) Total 11,400,000 $13,062,700 $15,102,700 (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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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**Exhibit 11.6: Ganado Europe's Translation Loss After Depreciation of the Euro: Temporal Method** This exhibit demonstrates the translation loss experienced by Ganado Europe following the depreciation of the Euro, using the temporal method. **Date: December 31, 2015** - **Assets:** - Cash: €1,200,000 at an exchange rate of 1.1100, equals $1,332,000. - Accounts Receivable: €2,800,000 at 1.1100, equals $3,108,000. - Inventory: €2,900,000 at 1.1330, equals $3,285,700. - Net Plant and Equipment: €4,500,000 at 1.1860, equals $5,337,000. - **Total Assets:** €11,400,000 equals $13,062,700. - **Liabilities and Net Worth:** - Accounts Payable: €1,200,000 at 1.1100, equals $1,332,000. - Short-term Bank Debt: €1,800,000 at 1.1100, equals $1,998,000. - Long-term Debt: €1,300,000 at 1.1100, equals $1,443,000. - Common Stock: €1,900,000 at 1.1860, equals $2,253,400. - Retained Earnings: €5,200,000 at 1.1525, equals $6,036,300 (a). - **Total Liabilities and Net Worth:** €11,400,000 equals $13,062,700. **Date: January 2, 2016** - **Exchange Rates:** - Cash, Accounts Receivable, and Liabilities converted at 1.6200. - Inventory remains at 1.1330. - Common Stock and Net Plant/Equipment remain at 1.1860. - Retained Earnings remain at 1.1525 (b). - **Assets:** - Cash now equals $1,944,000. - Accounts Receivable now equals $4,536,000. - Inventory remains $3,285,700. - Net Plant and Equipment remain $5,337,000. - **
Transcribed Image Text:**Exhibit 11.6: Ganado Europe's Translation Loss After Depreciation of the Euro: Temporal Method** This exhibit demonstrates the translation loss experienced by Ganado Europe following the depreciation of the Euro, using the temporal method. **Date: December 31, 2015** - **Assets:** - Cash: €1,200,000 at an exchange rate of 1.1100, equals $1,332,000. - Accounts Receivable: €2,800,000 at 1.1100, equals $3,108,000. - Inventory: €2,900,000 at 1.1330, equals $3,285,700. - Net Plant and Equipment: €4,500,000 at 1.1860, equals $5,337,000. - **Total Assets:** €11,400,000 equals $13,062,700. - **Liabilities and Net Worth:** - Accounts Payable: €1,200,000 at 1.1100, equals $1,332,000. - Short-term Bank Debt: €1,800,000 at 1.1100, equals $1,998,000. - Long-term Debt: €1,300,000 at 1.1100, equals $1,443,000. - Common Stock: €1,900,000 at 1.1860, equals $2,253,400. - Retained Earnings: €5,200,000 at 1.1525, equals $6,036,300 (a). - **Total Liabilities and Net Worth:** €11,400,000 equals $13,062,700. **Date: January 2, 2016** - **Exchange Rates:** - Cash, Accounts Receivable, and Liabilities converted at 1.6200. - Inventory remains at 1.1330. - Common Stock and Net Plant/Equipment remain at 1.1860. - Retained Earnings remain at 1.1525 (b). - **Assets:** - Cash now equals $1,944,000. - Accounts Receivable now equals $4,536,000. - Inventory remains $3,285,700. - Net Plant and Equipment remain $5,337,000. - **
**Ganado Europe (D).** Using facts from the chapter for Ganado Europe, assume that the exchange rate on January 2, 2016, in Exhibit 11.6 appreciated from $1.1100/€ to $1.6200/€. Calculate Ganado Europe's translated balance sheet for January 2, 2016, with the new exchange rate using the temporal rate method as shown in the popup window. a. What is the amount of translation gain or loss? b. Where should it appear in the financial statements? - - - - - - a. What is the amount of translation gain or loss? Enter a positive number for a gain and negative for a loss. \$[Text box] (Round to the nearest dollar.)
Transcribed Image Text:**Ganado Europe (D).** Using facts from the chapter for Ganado Europe, assume that the exchange rate on January 2, 2016, in Exhibit 11.6 appreciated from $1.1100/€ to $1.6200/€. Calculate Ganado Europe's translated balance sheet for January 2, 2016, with the new exchange rate using the temporal rate method as shown in the popup window. a. What is the amount of translation gain or loss? b. Where should it appear in the financial statements? - - - - - - a. What is the amount of translation gain or loss? Enter a positive number for a gain and negative for a loss. \$[Text box] (Round to the nearest dollar.)
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