On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Inc., a Norwegian company, at a cost of $165,600. Ships net assets on the date of acquisition were 700,000 kroner (NKr). On January 1, 20X5, the book and fair values of the Norwegian subsidiarys identifiable assets and liabilities approximated their fair values except for property, plant, and equipment and patents acquired. The fair value of Ships property, plant, and equipment exceeded its book value by $18,000. The remaining useful life of Ships 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. Ships trial balance on December 31, 20X5, in kroner, follows:

	Debits			Credits
Cash	NKr	153,000
Accounts Receivable (net)		201,000
Inventory		279,000
Property, Plant & Equipment		609,000
Accumulated Depreciation				NKr	155,000
Accounts Payable					93,000
Notes Payable					205,000
Common Stock					430,000
Retained Earnings					270,000
Sales					741,000
Cost of Goods Sold		418,000
Operating Expenses		113,000
Depreciation Expense		70,000
Dividends Paid		51,000
Total	NKr	1,894,000		NKr	1,894,000

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. Ships 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. Pirates income from its own operations was $265,000 for 20X5, and its total stockholders equity on January 1, 20X5, was $3,500,000. Pirate declared $110,000 of dividends during 20X5.
6. Exchange rates were as follows:

	NKr		$
July 1, 20X3	1	=	0.15
December 30, 20X4	1	=	0.18
January 1, 20X5	1	=	0.18
July 1, 20X5	1	=	0.19
December 15, 20X5	1	=	0.205
December 31, 20X5	1	=	0.21
Average for 20X5	1	=	0.20

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, including a schedule of the translation adjustment related to the differential. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record the purchase of Ship Inc.

Date	General Journal	Debit	Credit
January 01	Investment in Ship Company
	Cash

4. Record the parent's share of the translation adjustment from the translation of the subsidiary's accounts.

Date	General Journal	Debit	Credit
December 31	Investment in Ship Company
	Other Comprehensive Income Translation adjustment

5. Record the amortization of the differential.

Date	General Journal	Debit	Credit
December 31	Income from subsidiary
	Investment in Ship Company

6. Record the translation adjustment applicable to the differential.

Date	General Journal	Debit	Credit
December 31	Investment in Ship Company
	Other Comprehensive Income Translation adjustment

c. Prepare a schedule that determines Pirates consolidated comprehensive income for 20X5. (Amounts to be deducted should be indicated with a minus sign.)

Income from Pirates operations for 20X5, exclusive of income from the Norwegian subsidiary
Add: Income from the Norwegian subsidiary	22,600
Deduct: Amortization of differential
Pirates Net Income	$22,600
Add: Translation adjustment
Pirates Consolidated Comprehensive Income	$22,600

d. Compute Pirates total consolidated stockholders equity at December 31, 20X5.

Consolidated stockholders equity