Find the Foreign Currency Gain or Loss for This U

question 36

Essay

Find the foreign currency gain or loss for this U.S.MNC translating the balance sheet and income statement of a French subsidiary,which keeps its books in euro,then is translated into U.S.dollars using the current/noncurrent method-the reporting currency of the U.S.MNC.
The subsidiary is at the end of its first year of operation.The historical exchange rate is $1.60/€1.00 and the most recent exchange rate is $1.50/€.
$\begin{array}{lccccc}&&&\text { Curent/Nor }\\&\text { Local Currency }&&\text { current }\\\text { Balance Sheet }\\\text { Cash } & € 2,100 & & \$ 3,150 \\\text { Inventory (current Value }=€ 1,800) & € 1,50 \mathrm{C} & & \$ 2,250 \\\text { Net fixed assets } & € 3,000 & & \$ 4,800 \\\text { Total Assets } & € 6,600 & & \$ 10,200 \\\text { Current liabilities } & € 1,200& & \$ 1,800 \\\text { Long-term } & € 1,800& & \$ 32,880 \\\text { Common stock } & € 2,700 & & \$ 3,320 \\\text { Retained earnings } & € 900& &\\\text { Total L\&E } & € 6,600 & &\$ 10,200 \\\text { Income Statement } & & & & \\\text { Sales Revenue } & € 10,000 & & \$ 15,484 \\\text { COGS } & € 7,500 & & \$ 11,613 \\\text { Depreciation } & € 1,000 & & \$ 1,600 \\\text { NOI } & € 1,500& & \$ 2,271 \\\text { Tax }(40 \%) & € 600 & & \$ 908 \\\text { Profit after tax } & € 900 & & \$1,363\\\text { Net income } & € 900 \\\text { Dividends } & €0 && \$0\\\text { Addition to Retained Earnings }& € 900 \end{array}$

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Definitions:

Assembly Department

A section within a manufacturing facility where components are assembled into final products.

Employee Hours

The total number of hours worked by employees, often used for tracking labor costs, productivity, or workforce planning.

Space Occupied

Refers to the physical area taken up or used by an object, individual, or operation within a given environment.

Step-Down Method

A cost allocation method used in cost accounting to distribute overhead costs to various cost objects based on a hierarchy.