On January 1, 20X5, Taft Company acquired all of the outstanding stock of Vikix, Inc., a Norwegian

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On January 1, 20X5, Taft Company acquired all of the outstanding stock of Vikix, Inc., a Norwegian company at a cost of $151,200. Vikix'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 Vikix's property, plant, and equipment exceeded its book value by $18,000. The remaining useful life of Vikix'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. Vikix's trial balance on December 31, 20X5, in kroner, follows:


On January 1, 20X5, Taft Company acquired all of the


Additional Information
1. Vikix uses the FIFO method for its inventory. The beginning inventory was acquired on December 31, 20X4, and its ending inventory was acquired on December 15, 20X5. Purchases of NKr 420,000 were made evenly throughout 20X5.
2. Vikix acquired all of its property, plant, and equipment on July 1, 20X3, and uses straight-line depreciation.
3. Vikix'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. Taft's income from its own operations was $275,000 for 20X5, and its total stockholders' equity on January 1, 20X5, was $3,500,000. Taft declared $100,000 of dividends during 20X5.
6. Exchange rates were as follows:
July 1, 20X3 NKr1 = $.15
December 30, 20X4 NKr1 = $.18
January 1, 20X5 NKr1 = $.18
July 1, 20X5 NKr1 = $.19
December 15, 20X5 NKr1 = $.205
December 31, 20X5 NKr1 = $.21
Average for 20X5 NKr1 = $.20
Required Instructions
a. Prepare a schedule translating the trial balance from Norwegian kroner into U.S. dollars. Assume the kroner is the functional currency.
b. Assume that Taft uses the basic equity method. Record all journal entries that relate to its investment in the Norwegian subsidiary during 20X5. Provide the necessary documentation and support for the amounts in the journal entries, including a schedule of the translation adjustment related to the differential.
c. Prepare a schedule that determines Taft's consolidated comprehensive income for 20X5.
d. Compute Taft's total consolidated stockholders' equity at December 31,20X5.

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...
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Related Book For  answer-question

Advanced Financial Accounting

ISBN: 978-0078025624

10th edition

Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker

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