Reference no: EM132956053

Question - KWT Ltd is the Taiwan subsidiary of a U.S. auto parts manufacturer. KWT's balance sheet in thousands of Taiwan Dollar (TWD) as of June 30 as follows:

Balance Sheet, June 30, thousands of TWD

Assets

Cash TWD 35,000

Accounts receivable 100,000

Inventory 57,000

Net plant & equipment 40,000

TWD232,000

Liabilities & Net Worth

Accounts payable TWD 37,000

Long-term debt 66,000

Common stock 32,000

Retained earnings 97,000

TWD232,000

Exchange rates for translating KWT's balance sheet into U.S. dollars are:

June 30: $0.036/TWD (exchange rate before 10% devaluation)

Dec. 31: $0.0324/TWD (exchange rate after 10% devaluation)

The TWD dropped in value from $0.036/TWD to $0.0324/TWD between June 30 and Dec. 31. Assuming no change in balance sheet accounts between these two days, calculate the gain or loss from translation by both the current rate method and the temporal method.