On January 1, 20X5, the Norwegian subsidiary has a net monetary liability position of NKr74,000. (Amounts to be deducted should be indicated with a minus sign.) Norwegian Kroner Exchange Rate U.S. Dollars NKTI NKT 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 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 0 NKI 0 $ 0 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 Nkr $ 1 = 0.15 1 = 0.18 1 = 0.18 1 = 0.19 1 = 0.205 1 = 0.21 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 11,000 150,000 Monetary Liabilities Accounts Payable Nkr 85,000 Notes Payable 150,000 On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Inc., a Norwegian company, at a cost of $151,100. Ship's net assets on the date of acquisition were 600,000 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 $18,100. 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 NKT Debits 100,000 210,000 250,000 610,000 Nkr Cash 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 100,000 80,000 192,000 400,000 200,000 700,000 300,000 110,000 51,000 41,000 Nkr1,672,000 NKr1,672,000 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 NKr310,000 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 $230,000 for 20X5, and its total stockholders' equity on January 1, 20X5, was $3,000,000. Pirate declared $110,000 of dividends during 20X5. 6. Exchange rates were as follows: Nkr July 1, 20X3 December 30, 20X4 January 1, 2005 July 1, 20x5 December 15, 20x5 December 31, 20X5 Average for 20x5 $ 1 = 0.15 1 = 0.18 1 = 0.18 1 = 0.19 1 = 0.205 1 = 0.21 1 = 0.20