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    Detailed Example of a US/EURO Currency Translation

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    P18-2

    Translation of financial statements A U.S.-based MNC has a subsidiary in France (local currency, euro, ;). The balance sheet and income statement of the subsidiary follow. On 12/31/09, the exchange rate is US$1.20/;. Assume that the local (euro) figures for the statements remain the same on 12/31/10. Calculate the U.S. dollar translated figures for the two ending time periods, assuming that between 12/31/09 and 12/31/10 the euro has appreciated against the U.S. dollar by 6%.

    Translation of Income Statement
    12/31/09 12/31/10
    Euro US$ US$
    Sales 30,000.00
    Cost of goods sold 29,750.00
    Operating profits 250.00

    Translation of Balance Sheet
    12/31/09 12/31/10
    Assets Euro US$ US$
    Cash 40.00
    Inventory 300.00
    Plant and equipment (net) 160.00
    Total 500.00

    Liabilities and Stockholder's Equity
    Debt 240.00
    Paid-in capital 200.00
    Retained earnings 60.00
    Total 500.00

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    Solution Summary

    Translation of financial statements A U.S.-based MNC has a subsidiary in France (local currency, euro, ;). The balance sheet and income statement of the subsidiary follow. On 12/31/09, the exchange rate is US$1.20/;. Assume that the local (euro) figures for the statements remain the same on 12/31/10. Calculate the U.S. dollar translated figures for the two ending time periods, assuming that between 12/31/09 and 12/31/10 the euro has appreciated against the U.S. dollar by 6%.

    $2.19