On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Inc., a Norwegian company, at a cost of $152,700. Ship's net assets on the date of acquisition were 920,000 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 $19,700. 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: Credits Debits NKT 260,000 370,000 410,000 770,000 Cash Accounts Receivable (net) Inventory Property, Plant, & Equipment Accumulated Depreciation Accounts Payable Notes Payable Common Stock Retained Earnings NK 260,000 96,000 448,000 560,000 360,000 860,000 Sales Cost of Goods Sold Operating Expenses Depreciation Expense Dividends Paid Total 380,000 270,000 67,000 57,000 NKr2,584,000 NKr2,584,000 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 NK 390,000 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 roughout 20X5, and its operating expenses were incurred evenly throughout 20X5. 4. The dividends were declared and paid on July 1, 20X5. Check my work 5. Pirate's income from its own operations was $310,000 for 20X5, and its total stockholders' equity on January 1, 2005, was $4,600,000. Pirate declared $270,000 of dividends during 20X5. 6. Exchange rates were as follows: July 1, 20X3 December 30, 20X4 January 1, 20X5 July 1, 20x5 December 15, 20X5 December 31, 20x5 Average for 20x5 NKI $ 1 = 0.15 1 = 0.18 1 = 0.18 1 = 0.19 1 0.205 10.21 1 = 0.20 Assume the U.S. dollar is the functional currency, not the krone. Required: Prepare a schedule providing a proof of the remeasurement gain or loss. For this part of the problem, assume that the Norwegian subsidiary had the following monetary assets and liabilities at January 1, 20X5: Monetary Assets Cash Accounts Receivable (net) NKr 27,000 310,000 Monetary Accounts Payable Notes Payable Litie NKr165,000 250,000 On January 1, 2005, the Norwegian subsidiary has a net monetary liability position of NKr78,000. (Amounts to be deducted should be indicated with a minus sign.) On January 1, 20X5, the Norwegian subsidiary has a net monetary liability position of NKr78,000. (Amounts to be deduct indicated with a minus sign.) Norwegian Kroner Exchange Rate U.S. Dollars NKT Exposed net monetary liability position at January 1 Adjustments for changes in net monetary position during 20X5: Increases From operations: Sales NKT Decreases From operations: Purchases Operating expenses From dividends Net monetary asset position prior to remeasurement at year-end rates Exposed net monetary asset position at December 31 NKT Remeasurement loss