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 700,000 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 $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: Debits Credits Cash 162,000 220,000 NKr Accounts Receivable (net) Inventory Property, Plant & Equipment Accumulated Depreciation Accounts Payable Notes Payable Common Stock Retained Earnings 288,000 603,000 NKr 170,000 92,000 197,000 460,000 240,000 743,000 Sales 411,000 Cost of Goods Sold Operating Expenses Depreciation Expense Dividends Paid 120,000 A5 000 NKr1,902,000 NKr1,902,000 Total 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 NKr430,000 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 $264,000 for 20X5, and its total stockholders' equity on January 1, 20x5, was $3,500,000. Pirate declared $140,000 of dividends during 20X5. 6. Exchange rates were as follows: NKr 0.15 July 1, 20x3 December 30, 20x4 1=0.18 January 1, 20x5 July 1, 20X5 December 15, 20x5 1=0.18 1 =0.19 1 =0,205 1= 0.21 1 =0.20 December 31, 20X5 Average for 20X5 Required: a. Prepare a schedule translating the trial balance from Norwegian kroner into U.S. dollars. Assume the krone is the functional currency. (If no adjustment is needed, select 'no entry necessary'.) Answer is complete but not entirely correct. PIRATE INC. Trial Balance Translation December 31, 20X5 Balance Item Dollars Cash 34,020 Accounts Receivable (net) 46,200 Inventory 60,480 Property, Plant and Equipment 126,630 69,980 (X Cost of Goods Sold 24,000 Operating Expenses Depreciation Expense 10,600 Dividends Paid 8,550 380,460 Total No entry necessary 0 380,460 Total Debits $ Accumulated Depreciation 35,700 Accounts Payable 19,320 Notes Payable 41,370 Common Stock 82,800 Retained Earnings 43,200 Sales 148,600 Total 370,990 Accumulated other comprehensive income - translation adjustment 0 $ Total Credits 370,990 A 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.) Answer is complete but not entirely correct. No Date General Journal Debit Credit Investment in Ship Company 1 January 01 158,400 Cash 158,400 2 July 01 Cash 8,550 Investment in Ship Company 8,550 Investment in Ship Company December 31 3 38,955 38,955( Income from subsidiary Investment in Ship Company December 31 8,360 8,360x Other Comprehensive Income Translation adjustment Income from subsidiary 5,760 5 December 31 Investment in Ship Company 5,760 Investment in Ship Company 6 December 31 38,955 38,955 X Other Comprehensive Income - Translation adjustment c. Prepare a schedule that determines Pirate's consolidated comprehensive income for 20X5. (Amounts to be deducted should be indicated with a minus sign.) Answer is not complete. Income from Pirate's operations for 20X5 exclusive of income from the Norwegian subsidiary Add: Income from the Norwegian subsidiary Deduct: Amortization of differential Pirate's Net Income 0 Add: Translation adjustment $ Pirate's Consolidated Comprehensive Income 0 d. Compute Pirate's total consolidated stockholders' equity at December 31, 20X5. Consolidated stockholders' equity 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 700,000 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 $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: Debits Credits Cash 162,000 220,000 NKr Accounts Receivable (net) Inventory Property, Plant & Equipment Accumulated Depreciation Accounts Payable Notes Payable Common Stock Retained Earnings 288,000 603,000 NKr 170,000 92,000 197,000 460,000 240,000 743,000 Sales 411,000 Cost of Goods Sold Operating Expenses Depreciation Expense Dividends Paid 120,000 A5 000 NKr1,902,000 NKr1,902,000 Total 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 NKr430,000 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 $264,000 for 20X5, and its total stockholders' equity on January 1, 20x5, was $3,500,000. Pirate declared $140,000 of dividends during 20X5. 6. Exchange rates were as follows: NKr 0.15 July 1, 20x3 December 30, 20x4 1=0.18 January 1, 20x5 July 1, 20X5 December 15, 20x5 1=0.18 1 =0.19 1 =0,205 1= 0.21 1 =0.20 December 31, 20X5 Average for 20X5 Required: a. Prepare a schedule translating the trial balance from Norwegian kroner into U.S. dollars. Assume the krone is the functional currency. (If no adjustment is needed, select 'no entry necessary'.) Answer is complete but not entirely correct. PIRATE INC. Trial Balance Translation December 31, 20X5 Balance Item Dollars Cash 34,020 Accounts Receivable (net) 46,200 Inventory 60,480 Property, Plant and Equipment 126,630 69,980 (X Cost of Goods Sold 24,000 Operating Expenses Depreciation Expense 10,600 Dividends Paid 8,550 380,460 Total No entry necessary 0 380,460 Total Debits $ Accumulated Depreciation 35,700 Accounts Payable 19,320 Notes Payable 41,370 Common Stock 82,800 Retained Earnings 43,200 Sales 148,600 Total 370,990 Accumulated other comprehensive income - translation adjustment 0 $ Total Credits 370,990 A 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.) Answer is complete but not entirely correct. No Date General Journal Debit Credit Investment in Ship Company 1 January 01 158,400 Cash 158,400 2 July 01 Cash 8,550 Investment in Ship Company 8,550 Investment in Ship Company December 31 3 38,955 38,955( Income from subsidiary Investment in Ship Company December 31 8,360 8,360x Other Comprehensive Income Translation adjustment Income from subsidiary 5,760 5 December 31 Investment in Ship Company 5,760 Investment in Ship Company 6 December 31 38,955 38,955 X Other Comprehensive Income - Translation adjustment c. Prepare a schedule that determines Pirate's consolidated comprehensive income for 20X5. (Amounts to be deducted should be indicated with a minus sign.) Answer is not complete. Income from Pirate's operations for 20X5 exclusive of income from the Norwegian subsidiary Add: Income from the Norwegian subsidiary Deduct: Amortization of differential Pirate's Net Income 0 Add: Translation adjustment $ Pirate's Consolidated Comprehensive Income 0 d. Compute Pirate's total consolidated stockholders' equity at December 31, 20X5. Consolidated stockholders' equity