On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Inc., a Norwegian company, at a cost of $151,200 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 years. Ship's trial balance on December 31, 20x5 in kroner follows: Debits Credits Cash NKR 150,000 Accounts Receivable (net) 200,000 Inventory 270,000 Property, Plant & Equipment 600,000 Accumulated Depreciation Nkr 150,000 Accounts Payable 90,000 Notes Payable 190,000 Common Stock 450,000 Retained Earnings 250,000 Sales 690,000 Cost of Goods Sold 410,000 Operating Expenses 100,000 Depreciation Expense 50,000 Dividends Paid 40,000 Total Nr1,820,000 1,820,000 Additional Information: 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 $275,000 for 20x5, and its total stockholders' equity on January 1, 20X5, was $3,500,000. Pirate declared $100,000 of dividends during 20X5. 6 Exchange rates were as follows: any 1, 20x3 December 30, 20X4 January 1, 20xs July 1, 2005 December 15, 2005 December 31, 2005 Average for 20x5 NKT 1 = 0.15 0.18 1 0.18 0.19 @.205 3.21 18.20 Assume the US dollar is the functional currency, not the krone. Required: Prepare a schedule providing a proof of the remeasurement gain or loss. Assume that the Norwegian subsidiary had the following monetary assets and liabilities at January 1, 20X5 Monetary Assets Cash Accounts Receivable (net) Nr 10,000 140,000 Monetary Liabilities Accounts Payable NKR 70,000 Notes Payable 140,000 On January 1, 2005, the Norwegian subsidiary has a net monetary liability position of NK160,000. (Amounts to be deducted should be indicated with a minus sign.) Norwegian Kroner Exchange Rate US Dollar NKI Exposed net monetary liability position at January 1 Adjustments for changes in net monetary position during 20X5 Increases From operations Sales Decreases From operations Purchases NK: Newan Kronerlachange Rat. NK: Exposed net monetary liability position at January 1 Adjustments for changes in net monetary position during 20X5. Increases NK From operations Sales 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 Remeasurement loss NKI