On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Incorporated, a...

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On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Incorporated, a Norwegian company, at a cost of $156,600. Ship's net assets on the date of acquisition were 700.000 kroner (NKr). On January 1, 20X5, the book and fair values of the Norwegian subsidiary's identifiable assets and liabilities approximated their fair values except for property, plant, and equipment and patents acquired. The fair value of Ship's property, plant, and equipment exceeded its book value by $18,000. The remaining useful life of Ship's equipment at January 1, 20X5, was 10 years. The remainder of the differential was attributable to a patent having an estimated useful life of 5 years. Ship's trial balance on December 31, 20X5, in kroner, follows: Cash Accounts Receivable (net) Inventory Property, Plant and Equipment Accumulated Depreciation Accounts Payable Notes Payable Common Stock Retained Earnings Sales Cost of Goods Sold Operating Expenses Depreciation Expense Dividends Paid Total Additional Information: Debits Credits NKr 162,000 205,000 284,000 630,000 Kr 165,000 93,000 201,000 440,000 260,000 763,000 423,000 116,000 58,000 44,000 NKr 1,922,000 NKr 1,922,000 1. Ship uses the FIFO method for its inventory. The beginning inventory was acquired on December 31, 20X4, and ending inventory was acquired on December 15, 20X5. Purchases of NKr420,000 were made evenly throughout 20X5. 2. Ship acquired all of its property, plant, and equipment on July 1, 20X3, and uses straight-line depreciation. 3. Ship's sales were made evenly throughout 20X5, and its operating expenses were incurred evenly throughout 20X5. 4. The dividends were declared and paid on July 1, 20X5. 5. Pirate's income from its own operations was $230.000 for 20X5, and its total stockholders' equity on January 1, 20X5, was $3,600,000. Pirate declared $200,000 of dividends during 20X5. 6. Exchange rates were as follows: July 1, 20x3 December 30, 28x4 NK 1 $0.15 NK 1 $0.18 January 1, 20x5 July 1, 20x5 December 15, 28x5 NK 1 NK 1 = 5 0.18 NK 1 $8.19 0.205 December 31, 20x5 NKr 1 $ 0.21 Average for 20x5 NK 1 $0.20 Date January 01 General Journal Investment in Ship Company Debit 156,000 Credit Cash 156,600 July 01 Cash Investment in Ship Company December 31 Investment in Ship Company Income from subsidiary December 31 December 31 December 31 Investment in Ship Company Other Comprehensive Income-Translation adjustment Income from subsidiary Investment in Ship Company Investment in Ship Company Other Comprehensive Income - Translation adjustment > 8,360 8,360 33,200 33,200 21,780 21.780 5,200x 5.200 4.020 4,020 On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Incorporated, a Norwegian company, at a cost of $156,600. Ship's net assets on the date of acquisition were 700.000 kroner (NKr). On January 1, 20X5, the book and fair values of the Norwegian subsidiary's identifiable assets and liabilities approximated their fair values except for property, plant, and equipment and patents acquired. The fair value of Ship's property, plant, and equipment exceeded its book value by $18,000. The remaining useful life of Ship's equipment at January 1, 20X5, was 10 years. The remainder of the differential was attributable to a patent having an estimated useful life of 5 years. Ship's trial balance on December 31, 20X5, in kroner, follows: Cash Accounts Receivable (net) Inventory Property, Plant and Equipment Accumulated Depreciation Accounts Payable Notes Payable Common Stock Retained Earnings Sales Cost of Goods Sold Operating Expenses Depreciation Expense Dividends Paid Total Additional Information: Debits Credits NKr 162,000 205,000 284,000 630,000 Kr 165,000 93,000 201,000 440,000 260,000 763,000 423,000 116,000 58,000 44,000 NKr 1,922,000 NKr 1,922,000 1. Ship uses the FIFO method for its inventory. The beginning inventory was acquired on December 31, 20X4, and ending inventory was acquired on December 15, 20X5. Purchases of NKr420,000 were made evenly throughout 20X5. 2. Ship acquired all of its property, plant, and equipment on July 1, 20X3, and uses straight-line depreciation. 3. Ship's sales were made evenly throughout 20X5, and its operating expenses were incurred evenly throughout 20X5. 4. The dividends were declared and paid on July 1, 20X5. 5. Pirate's income from its own operations was $230.000 for 20X5, and its total stockholders' equity on January 1, 20X5, was $3,600,000. Pirate declared $200,000 of dividends during 20X5. 6. Exchange rates were as follows: July 1, 20x3 December 30, 28x4 NK 1 $0.15 NK 1 $0.18 January 1, 20x5 July 1, 20x5 December 15, 28x5 NK 1 NK 1 = 5 0.18 NK 1 $8.19 0.205 December 31, 20x5 NKr 1 $ 0.21 Average for 20x5 NK 1 $0.20 Date January 01 General Journal Investment in Ship Company Debit 156,000 Credit Cash 156,600 July 01 Cash Investment in Ship Company December 31 Investment in Ship Company Income from subsidiary December 31 December 31 December 31 Investment in Ship Company Other Comprehensive Income-Translation adjustment Income from subsidiary Investment in Ship Company Investment in Ship Company Other Comprehensive Income - Translation adjustment > 8,360 8,360 33,200 33,200 21,780 21.780 5,200x 5.200 4.020 4,020