Page 191 - DMGT549_INTERNATIONAL_FINANCIAL_MANAGEMENT

International Financial Management

Notes (a) Consolidated balance sheet for XYZ & its subsidiary ABC Ltd.
Assets Amount
Cash $11,000
Accounts receivable $16,000
Inventory $11,000
Net plant & equipment $19,000
Investment $4,500
Total $61,500
Liabilities & Net Worth Amount
Current liabilities $28,000
Five-year term loan $ 6,000
Capital stock $12,000
Retained earnings $15,500
Total $61,500
(b) Using the current rate method

Assets Amount
Cash $ 3,000
Accounts receivable $ 6,000
Inventory $ 3,000
Net plant & equipment $ 9,000
Total $ 21,000

Liabilities & Net Worth Amount
Current liabilities 6,000
Five-year term loan $ 6,000
Accounting Exposure $ 9,000
Total $ 21,000
(c) If currency depreciates by 9%, the current spot rate is $1.365/£.
(d) New position of the firm after depreciation

Assets Current Rate Method M/N.M. Amount
Cash $2,730 $2,730
Accounts receivable $5,460 $5,460
Inventory $2,730 $3,000
Net plant & equipment $8,190 $9,000
Total $19,110 $20,190

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