On January 1, 20x5, Pirate Company acquired all of the outstanding stock of Ship Inc, a Norwegian company, at a cost of $153,000 Ship's net assets on the date of acquisition were 700,000 kroner (NKI). 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 year. Ship's trial balance on December 31, 20X5, in kroner, follows: Debita Credits Cash NKE 156,000 Accounts Receivable (net) 209,000 Inventory 274,000 Property, Plant Equipment 630,000 Accumulated Depreciation NK 166.000 Accounts Payable 108,000 Notes Payable 198,000 Common Stock 450,000 Retained Earnings 250,000 Sales 729,000 Cost of Goods Sold 410,000 Operating Expenses 121.000 Depreciation Expenso 61,000 Dividends Paid 40,000 Total NK 1,901,000 Nr 1,901,000 Additional Information: 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 $231,000 for 20x5, and its total stockholders' equity on January 1, 20X5, was $3,600,000. Pirate declared $150,000 of dividends during 20X5. 6. Exchange rates were as follows: MKE July 1, 2003 10.15 December 30, 2004 10.18 January 1, 2005 1 = 0.10 July 1, 20x5 10.19 December 15, 2005 1 -0.205 December 31, 2005 10.21 Average for 2005 10.20 Assume the U.S. dollar is the functional currency, not the krone. Required: a. Prepare a schedule remeasuring the trial balance from Norwegian kroner into U.S. dollars. (If no adjustment is needed, select 'no entry necessary.) U.S. dollars Cash Accounts receivable (net) Inventory Property, plant, and equipment Cost of goods sold Operating expenses Depreciation expense Dividends paid Total $ 0 $ 0 Total Debits Accumulated depreciation Accounts payable Notes payable Common stock Retained earnings Sales Total $ 0 $ 0 Total credits b. Assume that Pirate uses the fully adjusted 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet
