Question

Please find below the worksheets in Exhibit 10.12 and 10.13 in which the financial statements of Arcot Company have been restated to U.S. GAAP.

Required:

Calculate each of the ratios listed below using (1) the Local GAAP amounts in Column 1, and (2) the U.S. GAAP amounts in Column 4. Round to 3 decimal places.

Ratio	Local GAAP	U.S. GAAP
Profit margin	[a]	[b]
Return on equity	[c]	[d]

Ratio	Local GAAP	U.S. GAAP
Debt/equity ratio	[a]	[b]
Operating profit margin	[c]	[d]

ARCOT COMPANY
Worksheet for Restatement of Income and Retained Earnings to U.S. GAAP
for the Year Ended December 31, Year 3
	(1)	(2)		(3)		(4)
		Reconciling Adjustments
(Millions of Crowns)	Local GAAP	Debit		Credit		U.S. GAAP
Sales	9,148					9,148
Cost of goods sold	(5,163)			169	(1)	(4,994)
Gross profit	3,985					4,154
Operating expenses	(453)	22	(4)	40	(2)	(350)
		5	(3)	14	(4)
				3	(6)
				73	(7)
Operating income	3,532					3,804
Interest expense	(156)					(156)
Other income(expense), net	132	124	(5)			(41)
		49	(8)
Income before income taxes	3,508					3,607
Provision for income taxes	(1,052)	29	(11)			(1,081)
Net income	2,456					2,526
Retained earnings, January 1	4,276	34	(4)	19	(1)
		24	(6)	40	(2)
		70	(8)	24	(3)
				13	(11)
Dividends	340			340	(10)	0
Retained earnings, December 31	6,392					6,770

ARCOT COMPANY
Worksheet for the Restatement of Balance Sheet to U.S. GAAP
for the Year Ended December 31, Year 3
	(1)	(2)		(3)		(4)
		Reconciling Adjustments
(Millions of Crowns)	Local GAAP	Debit		Credit		U.S. GAAP
Cash	1,704					1,704
Accounts receivable	2,798					2,798
Inventories	5,276	188	(1)			5,464
Total current assets	9,778					9,966
Property, plant, and equipment, net	11,807	19	(3)	120	(2)	11,985
				21	(6)
Long-term investments	1,305			62	(9)	1,243
Deferred charges	436			42	(4)	394
Total assets	23,326					23,288
Accounts payable	745					745
Accrued expenses	1,591					1,591
Short-term debt	100					100
Dividends payable	340	340	(10)
Other current liabilities	204			62	(5)	266
Total current liabilities	2,980					2,702
Long-term debt	5,000					5,000
Deferred income taxes	161			16	(11)	177
Other long-term liabilities	1,007	73	(7)	62	(5)	996
Total liabilities	9,148					8,875
Capital	150					150
Capital surplus	8,055					8,055
Retained earnings	6,392					6,770
Revaluation reserve	200	200	(2)
Unrealized gains (losses)	(119)			119	(8)
Treasury stock	(500)	62	(9)			(562)
Total stockholders' equity	14,178					14,413
Total liabilities and stockholders' equity	23,326					23,288

Answer 1