ABC company had the following balance sheet in millions of pesos on DEC. 31 2013
ID: 2535361 • Letter: A
Question
ABC company had the following balance sheet in millions of pesos on DEC. 31 2013
Assets Cash 400 Acct rec. 200 Inventory 800 Net plant and equipment 600
Liabilities and net worth Acct pay 500 Long Term debt 300 Capital stock 400 Retained earnings 800
Relevant exchange rate
$.08/peso inventory and capital stock was issued at this rate
$.10/peso plant & equipment LT debt Ex rate for 31 dec 2013 $.12/peso ex rate 01 Jan 2014
As of 2013 assume retained earnings under current rate was $80 million
under the current rate method, what is the value of the CTA account on January 1 2014?
under the temporal method, what is the exchange gain or loss between dec 31 2013 and January 1 2014?
Under the temporal method, what is the value of the exposed assets in dollars on December 31, 2013?
ABC company had the following balance sheet in millions of pesos on DEC. 31 2013
Assets Cash 400 Acct rec. 200 Inventory 800 Net plant and equipment 600
Liabilities and net worth Acct pay 500 Long Term debt 300 Capital stock 400 Retained earnings 800
Relevant exchange rate
$.08/peso inventory and capital stock was issued at this rate
$.10/peso plant & equipment LT debt Ex rate for 31 dec 2013 $.12/peso ex rate 01 Jan 2014
As of 2013 assume retained earnings under current rate was $80 million
under the current rate method, what is the value of the CTA account on January 1 2014?
under the temporal method, what is the exchange gain or loss between dec 31 2013 and January 1 2014?
Under the temporal method, what is the value of the exposed assets in dollars on December 31, 2013?
ABC company had the following balance sheet in millions of pesos on DEC. 31 2013
Assets Cash 400 Acct rec. 200 Inventory 800 Net plant and equipment 600
Liabilities and net worth Acct pay 500 Long Term debt 300 Capital stock 400 Retained earnings 800
Relevant exchange rate
$.08/peso inventory and capital stock was issued at this rate
$.10/peso plant & equipment LT debt Ex rate for 31 dec 2013 $.12/peso ex rate 01 Jan 2014
As of 2013 assume retained earnings under current rate was $80 million
under the current rate method, what is the value of the CTA account on January 1 2014?
under the temporal method, what is the exchange gain or loss between dec 31 2013 and January 1 2014?
Under the temporal method, what is the value of the exposed assets in dollars on December 31, 2013?
Explanation / Answer
Current rate method Assets Amount in millions of pesos Exchange rate Amount in millions of $ Cash 400 $0.12/peso $48 Acct. rec. 200 $0.12/peso $24 Inventory 800 $0.12/peso $96 Net plant and equipment 600 $0.12/peso $72 Total Assets $240 Liabilities & net worth Acct pay. 500 $0.12/peso $60 Long term debt 300 $0.12/peso $36 CTA $32 Capital Stock 400 $0.08/peso $32 Retained earnings 800 $80 Total Liabilities and net worth $240 CTA account on January 1 2014 = $32 millions Temporal rate method Assets Amount in millions of pesos Exchange rate Amount in millions of $ Cash 400 $0.12/peso $48 Acct. rec. 200 $0.12/peso $24 Inventory 800 $0.08/peso $64 Net plant and equipment 600 $0.10/peso $60 Total Assets $196 Liabilities & net worth Acct pay. 500 $0.12/peso $60 Long term debt 300 $0.10/peso $30 Capital Stock 400 $0.08/peso $32 Retained earnings 800 $74 Total Liabilities and net worth $196 Exchange loss of $6 million adjusted in retained earnings Value of exposed assets is $12 million($48+$24-$60) on Dec 31, 2013, under temporal method Assets exposed to risk are those which are translated at current rate. Current assets - current liabilities