EXHIBIT 11.6 Ganado Europe's Translation Loss After Depreciation of the Euro: Temporal Method January 2, 2016 Exchange Rate (US$Sleuro) 1.2300 December 31, 2015 Translated Accounts (US$) $1,230,000 3,567,000 Exchange Rate (US$leuro) 1.6300 Translated Accounts (US$) $1,630,000 In Euros (€) 1,000,000 Assets Cash Accounts receivable 2,900,000 1.2300 1.6300 4,727,000 3,753,000 Inventory Net plant and equipment 3,000,000 1.2510 3,753,000 1.2510 6,545,000 $15,095,000 1.3090 1.3090 5,000,000 11,900,000 6,545,000 Total $16,655,000 Liabilities and Net Worth Accounts payable 800,000 1.2300 $984,000 1.6300 $1,304,000 Short-term bank debt 1,600,000 1.2300 1,968,000 1.6300 2,608,000 1,900,000 Long-term debt Common stock Retained earnings Translation gain (loss) 1.2300 2,337,000 1.6300 3,097,000 3,010,700 6,795,300 1.3090 1.3090 3,010,700 6,795,300 2,300,000 5,300,000 1.2724 (a) 1.2724 (b) (c) $16,655,000 Total 11,900,000 $15,095,000 (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
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Chapter1: Financial Statements And Business Decisions
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**EXHIBIT 11.6**  *Ganado Europe's Translation Loss After Depreciation of the Euro: Temporal Method*

**December 31, 2015**  
**January 2, 2016**

---

### Assets

| Description                | In Euros (€) | Exchange Rate (US$/euro) | Translated Accounts (US$) |
|----------------------------|--------------|--------------------------|---------------------------|
| Cash                       | 1,000,000    | 1.2300                   | 1,230,000                 |
| Accounts receivable        | 2,900,000    | 1.2300                   | 3,567,000                 |
| Inventory                  | 3,000,000    | 1.2510                   | 3,753,000                 |
| Net plant and equipment    | 5,000,000    | 1.3090                   | 6,545,000                 |
| **Total**                  | 11,900,000   |                          | 15,095,000                |

### Liabilities and Net Worth

| Description                | In Euros (€) | Exchange Rate (US$/euro) | Translated Accounts (US$) |
|----------------------------|--------------|--------------------------|---------------------------|
| Accounts payable           | 800,000      | 1.2300                   | 984,000                   |
| Short-term bank debt       | 1,600,000    | 1.2300                   | 1,968,000                 |
| Long-term debt             | 1,900,000    | 1.2300                   | 2,337,000                 |
| Common stock               | 2,300,000    | 1.3090                   | 3,010,700                 |
| Retained earnings          | 5,300,000    | 1.2724                   | 6,795,300  (a)            |
| **Translation gain (loss)**|              | 1.2724 (b)               | (c)                       |
| **Total**                  | 11,900,000   |                          | 15,095,000                |

---

**January 2, 2016** Translated Accounts (US$):

- Cash: 1,630,000
- Accounts receivable: 4,727,
Transcribed Image Text:**EXHIBIT 11.6** *Ganado Europe's Translation Loss After Depreciation of the Euro: Temporal Method* **December 31, 2015** **January 2, 2016** --- ### Assets | Description | In Euros (€) | Exchange Rate (US$/euro) | Translated Accounts (US$) | |----------------------------|--------------|--------------------------|---------------------------| | Cash | 1,000,000 | 1.2300 | 1,230,000 | | Accounts receivable | 2,900,000 | 1.2300 | 3,567,000 | | Inventory | 3,000,000 | 1.2510 | 3,753,000 | | Net plant and equipment | 5,000,000 | 1.3090 | 6,545,000 | | **Total** | 11,900,000 | | 15,095,000 | ### Liabilities and Net Worth | Description | In Euros (€) | Exchange Rate (US$/euro) | Translated Accounts (US$) | |----------------------------|--------------|--------------------------|---------------------------| | Accounts payable | 800,000 | 1.2300 | 984,000 | | Short-term bank debt | 1,600,000 | 1.2300 | 1,968,000 | | Long-term debt | 1,900,000 | 1.2300 | 2,337,000 | | Common stock | 2,300,000 | 1.3090 | 3,010,700 | | Retained earnings | 5,300,000 | 1.2724 | 6,795,300 (a) | | **Translation gain (loss)**| | 1.2724 (b) | (c) | | **Total** | 11,900,000 | | 15,095,000 | --- **January 2, 2016** Translated Accounts (US$): - Cash: 1,630,000 - Accounts receivable: 4,727,
**Ganado Europe (D).** Using facts in the chapter for Ganado Europe, assume that the exchange rate on January 2, 2016, in Exhibit 11.6 appreciated from $1.2300/€ to $1.6300/€. 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?

*Enter a positive number for a gain and a negative for a loss.*

$ [___________] (Round to the nearest dollar.)
Transcribed Image Text:**Ganado Europe (D).** Using facts in the chapter for Ganado Europe, assume that the exchange rate on January 2, 2016, in Exhibit 11.6 appreciated from $1.2300/€ to $1.6300/€. 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? *Enter a positive number for a gain and a negative for a loss.* $ [___________] (Round to the nearest dollar.)
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