Shanghai Corporation, the Chinese affiliate of a U.S. manufacturer, has the balance sheet shown below. The current exchange rate is $.0.15 = CNY1.

Required:
a. Translate the Chinese dollar balance sheet of Shanghai Corporation into U.S. dollars at the current exchange rate of $.0.15 12 = CNY1. All monetary accounts in Shanhai€™s balance sheet are denominated in Chinese yuan.
b. Assume the Chinese yuan revalues from $0.15 = CNY1 to $0.1875 = CNY1. What would be the translation effect if Shanghai€™s balance sheet is translated by the current€“noncurrent method? By the monetary€“nonmonetary method?
c. Assume instead that the Chinese yuan weakens from $0.15 = CNY1 to $0.1125 = CNY1. What would be the translation effect under each of the two translationmethods?

Transcribed Image Text:

Balance Sheet of Shanghai Corporation (000's) Assets Cash Accounts receivable Inventories (cost 24,000) Fixed assets, net Total assets Liabilities CNY 5,000 Accounts payable 14,000 Long-term debt 22,000 39,000 Stockholders' equity 27,000 CNY80,000 b & SE 32,000 CNY80,000