On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Inc., a Norwegian company, at a cost of $158,400. Ship's net assets on the date of acquisition were 780,000 kroner (NK). 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 Debits NKr 152,000 216,000 Credits Accounts Receivable (net) Inventory Property, Plant & Equipment Accumulated Depreciation Accounts Payable Notes Payable Common Stock Retained Earnings Sales Cost of Goods Sold Operating Expenses Depreciation Expense Dividends Paid Total 284,000 629,000 NKr 163,100 95,000 209,000 430,000 350,000 668,900 418,500 119,000 53,000 44,500 NK 1,916,000 NK1,916,000 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 $225,000 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, 2003 December 30, 2004 January 1, 20x5 July 1, 20x5 December 15, 2005 December 31, 2005 Average for 20x5 Required: 1 0.15 1- 1 0.18 0.18 10.19 1 0.205 1 = 0.21 1 = 0.20 Prepare a schedule providing a proof of the translation adjustment. (Amounts to be deducted should be indicated with a minus sign.) Norwegian Kroner Exchange U.S. Rate Dollars NK 1,281,000 0.21 $269,010 Net assets at beginning of year Adjustments for changes in net assets position during 2005: Net income Less: Dividends paid Net assets translated at Rates during year $ 269,010 Rates at end of year adjustment during year NK 1,281,000 Change in other comprehensive income-translation $269,010 Accumulated other comprehensive income-translation adjustment - January 1 Accumulated other comprehensive income-translation adjustment December 31 (credit) $269,010