Accounting standards and procedures in the United States have a major influence on the translation exposure of U.S.-based MNCs. One such standardis the requirement that MNCs use a weighted average exchange rate when consolidating financial statements from foreign subsidiaries.Suppose that Canton Co. is a U.S.-based MNC with a foreign subsidiary in Germany, which deals in euros. The local earnings of this German subsidiaryover a two-year period are shown in the following table, along with the weighted average exchange rate of the euro.For each of the two years, enter the translated earnings for the German subsidiary (in dollars) in the last column of the table.PeriodYear 1Year 2Local Earnings of GermanSubsidiary(Euros, Millions)2020Weighted Average Exchange Rate ofTranslated U.S. Dollar Earnings of GermanSubsidiaryEuro(Dollars, Millions)$$1.40$1.20Because of a change in the weighted average exchange rate of the euro, the translated earnings of the German subsidiary, in dollars,

Earnings from a local subsidiary are converted to the parent company's currency using an average…

For each of the two years, enter the translated earnings for the German subsidiary (in dollars) in the last column of the table. Period Year 1 Year 2 Local Earnings of German Subsidiary (Euros, Millions) 20 20 Weighted Average Exchange Rate of Translated U.S. Dollar Earnings of German Subsidiary Euro (Dollars, Millions) $1.40 $ $1.20 $ Because of a change in the weighted average exchange rate of the euro, the translated earnings of the German subsidiary, in dollars,

For each of the two years, enter the translated earnings for the German subsidiary (in dollars) in the last column of the table. Period Year 1 Year 2 Local Earnings of German Subsidiary (Euros, Millions) 20 20 Weighted Average Exchange Rate of Translated U.S. Dollar Earnings of German Subsidiary Euro (Dollars, Millions) $1.40 $ $1.20 $ Because of a change in the weighted average exchange rate of the euro, the translated earnings of the German subsidiary, in dollars,

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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