Finlandiva, a furniture manufacturer based in Finland, is owned by U.S.-based Couch Potato, Inc.. Finlandiva's balance sheet at the current exchange rate of $1.00/ is shown in the following table:
|
Assets
|
Value in C$
|
Value at Value at Translation C$1.60/$ C$1.50/$ gains or losses
|
|
Cash & marketable securities
|
C$320,000
|
$200,000
|
|
Accounts receivable
|
C$160,000
|
$100,000
|
|
Inventory
|
C$640,000
|
$400,000
|
|
Plant and equipment
|
C$480,000
|
$300,000
|
|
Total assets
|
C$1,600,000
|
$1,000,000
|
|
Liabilities Accounts payable
|
C$320,000
|
$200,000
|
|
Wages payable
|
C$160,000
|
$100,000
|
|
Net worth
|
C$1,120,000
|
$700,000
|
|
Total liabilities & net worth
|
C$1,600,000
|
$1,000,000
|
a. Identify Couch Potato's exposed assets, exposed liabilities, and net exposed assets under FAS #52.
b. Identify the impact of a 20 percent depreciation of the euro on Couch Potato's consolidated balance sheet.