Refer to Darvish Company in problem P18-5. Use the same information, except assume Cubbie translates Darvish’s financial statements into U.S. dollars using the temporal method.
Required:
1. What is the amount of Darvish’s translation exposure at December 31, 20X1?
2. Ignoring any changes in Darvish’s translation exposure that might arise during 20X2, what amount of translation gain or loss arises in 20X2 if the euro’s value falls from $1.20 at December 31, 20X1, to $1.15 at December 31, 20X2?
3. Is the translation gain or loss referred to in Requirement 2 included in net income or in other comprehensive income?
