Required: Using an Excel Spreadsheet, complete the following four questions following the format in the text. Where appropriate, show your calculations to ensure partial credit.

1. Translate (remeasure) Impala’s financial statements into U.S. dollars in accordance with U.S. GAAP at December 31, Year 2 assuming the Riggnit is the functional currency. The December 31, Year 1, retained earnings that appeared in Impala’s translated (remeasured) financial statements was $56,250.

2. Translate (remeasure) Impala’s financial statements into U.S. dollars in accordance with U.S. GAAP at December 31, Year 2 assuming the U.S. dollar is the functional currency. The December 31, Year 1, retained earnings that appeared in Impala’s translated (remeasured) financial statements was $882,500.

3. Explain why the translation adjustments in No.1 and No.2 above are positive or negative. Your response should include the relationship between net asset/liability exposures and movements in FX rates during the period.

4. Calculate and present the following ratios for Impala at December 31, Year 2 using (a) the RM-denominated financial statements, (b) the U.S.-dollar financial statements in No. 1 above, and (c) the U.S.-dollar financial statements in No. 2 above:

Current Ratio

Total Liabilities to Total Equity

Profit Margin (Net Income/Sales)

What relationships are apparent in these calculations? In other words, which method (Current or Temporal) provides results that are more consistent with ratios calculated using the foreign currency? Explain.

Answer rating: 100% (QA)

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