2. (30%) On January 1, 2008, Taft (a US company) acquired all of the outstanding stock of Herring Inc. a Norwegian Company. The financial statements of Herring are included on the attached worksheet. Assume that the functional currency of Herring is the dollar. Other potentially pertinent information follows: Exchange rates: January 1, 2008 NKr1 = $.36 July 1, 2008 NKr1 = $.34 December 15, 2008 NKr1 = $.30 December 31, 2008 NKr1 = $.29 Average for 2008 NKr1 = $.32 a. Herring uses the FIFO method for its inventory. The beginning inventory of 440,000 NKr was acquired on December 31, 2007 when the exchange rate was NKr1 = $.36. Purchases of NKr 1,680,000 were made evenly throughout 2008. Ending inventory was purchased on December 15, 2008. b. Herring acquired all of its plant and equipment before January 1, 2008. c. Herring's sales and operating expenses were all made (incurred) evenly throughout 2008. d. Dividends were declared and paid on July 1, 2008 of 40,000 NKr. Required: a. Prepare the translation/remeasurement worksheet for Herring (last page of exam). Show all of your work on that page, well-labelled. b. Assume instead that the functional currency is the kroner. Directly compute the change in the other comprehensive income account or the remeasurement gain or loss (which one is it?) Make sure that you indicate on which financial statement such an effect would be reflected