Here is given a balance sheet of a North Macedonian subsidiary of a US parent company. Calculate translation gain or loss under current rate method if the exchange rate changes from 50 denar/US. dollar to 60 denar/U.S. dollar? (H denotes historical exchange rate, C denotes current exchange rate). Since Cumulative Translation Adjustment (CTA) Account is not zero at the beginning. you have also to calculate it before the devaluation happens. Balance Sheet Macedonian (MKD) Before Devaluation Exchange Rate (MKD/USS) After Devaluation Exchange Rate (MKD/USS) Assets Translated Translated Denar Accounts Accounts US Dollars US Dollars Statement MKD 27,000,000 49.00 (H) 50.00 (C) 48.00 (H) 50.00 (C) 49.00 (H) 60.00 (C) 48.00 (H) 60.00 (C) Cash Accounts 151,200,000 Receivable 45.00 (H) 50.00 (C) 40.00 (H) 50.00 (C) Inventory 43,200,000 45.00 (H) 60.00 (C) 40.00 (H) 60.00 (C) Net Plant and 86,400,000 Equipment Total MKD 307,800,000 Liabilities & Net Worth 48.50 (H) 60.00 (C) 47.50 (H) 60.00 (C) Accounts MKD 37,800,000 48.50 (H) 50.00 (C) 47.50 (H) 50.00 (C) 31.25 (H) 50.00 (C) Payable Bank Loans 108,000,000 60,000,000 31.25 (H) 60.00 (C) Common Stock 37.50 (H) 50.00 (C) 37.50 (H) 60.00 (C) Retained 102,000,000 Earnings Cumulative Translation Adjustment Account (Loss) Total MKD 307,800,000 Instead, the translation gain(loss) arising from the fall in the value of Macedonian Denar can be calculated as follows: Net Exposed Assets (US $) Percentage Change in the Value of Macedonian Denar Increase in Translation Gain (Loss) after Devaluation of the Macedonian Denar
Here is given a balance sheet of a North Macedonian subsidiary of a US parent company. Calculate translation gain or loss under current rate method if the exchange rate changes from 50 denar/US. dollar to 60 denar/U.S. dollar? (H denotes historical exchange rate, C denotes current exchange rate). Since Cumulative Translation Adjustment (CTA) Account is not zero at the beginning. you have also to calculate it before the devaluation happens. Balance Sheet Macedonian (MKD) Before Devaluation Exchange Rate (MKD/USS) After Devaluation Exchange Rate (MKD/USS) Assets Translated Translated Denar Accounts Accounts US Dollars US Dollars Statement MKD 27,000,000 49.00 (H) 50.00 (C) 48.00 (H) 50.00 (C) 49.00 (H) 60.00 (C) 48.00 (H) 60.00 (C) Cash Accounts 151,200,000 Receivable 45.00 (H) 50.00 (C) 40.00 (H) 50.00 (C) Inventory 43,200,000 45.00 (H) 60.00 (C) 40.00 (H) 60.00 (C) Net Plant and 86,400,000 Equipment Total MKD 307,800,000 Liabilities & Net Worth 48.50 (H) 60.00 (C) 47.50 (H) 60.00 (C) Accounts MKD 37,800,000 48.50 (H) 50.00 (C) 47.50 (H) 50.00 (C) 31.25 (H) 50.00 (C) Payable Bank Loans 108,000,000 60,000,000 31.25 (H) 60.00 (C) Common Stock 37.50 (H) 50.00 (C) 37.50 (H) 60.00 (C) Retained 102,000,000 Earnings Cumulative Translation Adjustment Account (Loss) Total MKD 307,800,000 Instead, the translation gain(loss) arising from the fall in the value of Macedonian Denar can be calculated as follows: Net Exposed Assets (US $) Percentage Change in the Value of Macedonian Denar Increase in Translation Gain (Loss) after Devaluation of the Macedonian Denar
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question

Transcribed Image Text:Here is given a balance sheet of a North Macedonian subsidiary of a US parent company. Calculate
translation gain or loss under current rate method if the exchange rate changes from 50 denar/US.
dollar to 60 denar/U.S. dollar? (H denotes historical exchange rate, C denotes current exchange
rate). Since Cumulative Translation Adjustment (CTA) Account is not zero at the beginning, you
have also to calculate it before the devaluation happens.
Balance Sheet
Before Devaluation
Exchange Rate
(MKD) (MKD/USS)
After Devaluation
Exchange Rate
(MKD/USS)
Assets
Маccdonian
Denar
Statement
MKD 27,000,000
Translated
Translated
Ассounts
Ассounts
US Dollars
US Dollars
49.00 (H)
50.00 (C)
48.00 (H)
50.00 (C)
49.00 (H)
60.00 (C)
48.00 (H)
60.00 (C)
Cash
Ассounts
151,200,000
Receivable
45.00 (H)
50.00 (C)
40.00 (H)
50.00 (C)
45.00 (H)
60.00 (C)
40.00 (H)
60.00 (C)
Inventory
43,200,000
Net Plant and
86,400,000
Equipment
Tntal
MKD 307,800,000
Liabilities &
Net Worth
Ассounts
48.50 (H)
50.00 (C)
47.50 (H)
48.50 (H)
60.00 (C)
47.50 (H)
60.00 (C)
31.25 (H)
60.00 (C)
37.50 (H)
MKD 37,800,000
Payable
Bank Loans
108,000,000
50.00 (C)
31.25 (H)
50.00 (C)
37.50 (H)
50.00 (C)
Common Stock
60,000,000
Retained
102,000,000
Earnings
60.00 (C)
Cumulative
Translation
Adjustment
Account (Loss)
Tntal
MKD 307,800,000
Instead, the translation gain(loss) arising from the fall in the value of Macedonian Denar can be calculated as follows:
Net Exnosed Assets (US S)
Percentage Change in the Value of Macedonian Denar
Increase in Translation Gain (Loss) after Devaluation of the Macedonian Denar
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