Ganado Europe (A). Using facts in the chapter for Ganado Europe, assume the exchange rate on January 2, 2020, in Exhibit 11.5 dropped in value from $1.2000 = €1.00 to $0.9000 = €1.00 (rather than to $1.0000 = €1.00). Recalculate Ganado Europe’s translated balance sheet for January 2, 2020, with the new exchange rate using the current rate method.What is the amount of translation gain or loss?Where should the translation gain or loss appear in the financial statements? AssetsCashAccounts receivableInventoryNet plant & equipmentTotalLiabilities & Net WorthAccounts payableShort-term bank debtLong-term debtCommon stockRetained earningsTranslation adjustment (CTA)TotalIn Euros (€)1,600,0003,200,0002,400,0004,800,00012,000,000800,0001,600,0001,600,0001,800,0006,200,000December 31, 2019Exchange Rate($ = €1.00)1.20001.20001.20001.20001.20001.20001.20001.27601.2000 (a)TranslatedAccounts ($)$ 1,920,0003,840,0002,880,0005,760,000$ 14,400,000$960,0001,920,0001,920,0002,296,8007,440,000$ (136,800)$ 14,400,000January 2, 2020TranslatedAccounts ($)Exchange Rate($ = €1.00)1.00001.00001.00001.00001.00001.00001.00001.27601.2000 (b)$ 1,600,0003,200,0002,400,0004,800,000$ 12,000,000800,0001,600,0001,600,0002,296,8007,440,000$ (1,736,800)$ 12,000,00012,000,000(a) Dollar retained earnings before depreciation are the cumulative sum of additions to retained earnings of all prior years, translated at exchange rates ineach year.(b) Translated into dollars at the same rate as before depreciation of the euro.

Balance sheet: The summary of assets, liabilities, and owner's funds is termed the balance sheet of the company. It shows how much claim outsiders have on the assets of the company, and what is left for owners.Supporting calculation: Note: It shows the translation loss.Requirement 2: In retained earnings section Explanation: Translation gain should be adjusted to retained earnings, as there is a loss the amount of retained earnings will be decreased.

Answered: Ganado Europe (A). Using facts in the…

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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Question

Ganado Europe (A). Using facts in the chapter for Ganado Europe, assume the exchange rate on January 2, 2020, in Exhibit 11.5 dropped in value from $1.2000 = €1.00 to $0.9000 = €1.00 (rather than to $1.0000 = €1.00). Recalculate Ganado Europe’s translated balance sheet for January 2, 2020, with the new exchange rate using the current rate method.

What is the amount of translation gain or loss?
Where should the translation gain or loss appear in the financial statements?

Assets
Cash
Accounts receivable
Inventory
Net plant & equipment
Total
Liabilities & Net Worth
Accounts payable
Short-term bank debt
Long-term debt
Common stock
Retained earnings
Translation adjustment (CTA)
Total
In Euros (€)
1,600,000
3,200,000
2,400,000
4,800,000
12,000,000
800,000
1,600,000
1,600,000
1,800,000
6,200,000
December 31, 2019
Exchange Rate
($ = €1.00)
1.2000
1.2000
1.2000
1.2000
1.2000
1.2000
1.2000
1.2760
1.2000 (a)
Translated
Accounts ($)
$ 1,920,000
3,840,000
2,880,000
5,760,000
$ 14,400,000
$
960,000
1,920,000
1,920,000
2,296,800
7,440,000
$ (136,800)
$ 14,400,000
January 2, 2020
Translated
Accounts ($)
Exchange Rate
($ = €1.00)
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.0000
1.2760
1.2000 (b)
$ 1,600,000
3,200,000
2,400,000
4,800,000
$ 12,000,000
800,000
1,600,000
1,600,000
2,296,800
7,440,000
$ (1,736,800)
$ 12,000,000
12,000,000
(a) Dollar retained earnings before depreciation are the cumulative sum of additions to retained earnings of all prior years, translated at exchange rates in
each year.
(b) Translated into dollars at the same rate as before depreciation of the euro.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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