31, 2016: ABC Company had the following balance sheet in millions of pesos on Li

Question

31, 2016: ABC Company had the following balance sheet in millions of pesos on Liabilities and Net Worth Cash 100 LT Debt Capital Stock 200 500 800 Net Plant and Equipment Relevant exchange rates: S.10/Peso Inventory and Capital Stock were acquired/issued at this rate Plant and equipment and long-term debt were acquired/obtained at this rate. $.08/Peso This was also the exchange rate on December 31, 2016. $.14/Peso Exchange rate on January 1, 2017. Assume no change in the peso accounts between December 31, 2016 and January 1,2017. Assume the value of retained earnings under the current rate method was $50 million on December 31 ,2016. What is the accounting gain or loss under the current rate method? What is the accounting gain or loss under the temporal method? Give the balance sheet accounts in $ as of January 1, 2017 for both the current rate method and the temporal method. 36 points.

Explanation / Answer

Current Rate Method Accounts Value before Value After Change Cash 8 14 6 Accounts Receivable 48 84 36 Inventries 40 70 30 New plant and Equipment 64 112 48 160 280 120 Accounts payable 32 56 24 Long-term Debt 48 84 36 Captial stock 20 20 0 Retained Earnings 50 50 0 CTA 10 70 60 Temporal Method Accounts Value before Value After Change Cash 8 14 6 Accounts Receivable 48 84 36 Inventries 50 50 0 New plant and Equipment 64 64 0 170 212 42 Accounts payable 32 56 24 Long-term Debt 48 66 18 Captial stock 20 20 0 Retained Earnings 70 70 0 Total 0

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