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    Currency translation methods: temporal method

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    Ajax Manufacturing's German subsidiary has the following balance sheet(in DM):

    Cash, marketable securities: 250,000
    Accounts receivable 1,000,000
    Inventory ( at market) 2,700,000
    Fixed assets: 5,100,000
    Total assets DM 9,050,000

    Current liabilities DM 750,000
    Long-term debt 3,400,000
    Equity 4,900,000
    Total liabilities plus equity: DM 9,050,000.
    Suppose the DM appreciates from $0.70 to $0.76 during the period.

    Under the temporal method what is Ajax's traslation gain(loss)?

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    Solution Summary

    The solution uses temporal method to calculate Ajax's traslation gain(loss).