CHAPTER 12 2 PLEASE READ this question has 4 parts please an

CHAPTER 12, 2

PLEASE READ: this question has 4 parts, please answer the FULL question, please TYPE your answer, please LABEL your answer.

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 Accounts Receivable (net) Inventory Property, Plant & Equipment Accumulated Depreciation Accounts Payable Notes Pavable Common Stock Retained Earnings Sales Cost of Goods Sold Operating Expenses Depreciation Expense Dividends Paid Total NKr 153,000 228,000 297,000 614,000 000 NK 0 NKr 161,000 108,000 200,000 450,000 250,000 765,000 417,000 120,000 57,000 48,000 NKr1,934,000 NKr1,934,000 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. 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 $3,500,000. Pirate declared $140,000 of dividends during 20X5 6. Exchange rates were as follows:

Solution

a) NKr Exchange Rate In $ Cash 153000 0.21 32130 Accounts Receivable(Net) 228000 0.21 47880 Inventory 297000 0.21 62370 Property, plant and equipment 614000 0.21 128940 Cost of goods sold 417000 0.2 83400 Operating expenses 120000 0.2 24000 Depreciation expense 57000 0.2 11400 Dividends paid 48000 0.19 9120 Total 1934000 399240 Total Debits Accumulated depreciation 161000 0.21 33810 Accounts payable 108000 0.21 22680 Notes payable 200000 0.21 42000 common stock 450000 0.18 81000 Retained earnings 250000 0.18 45000 Sales 765000 0.2 153000 Total 1934000 377490 Accumulated other comprehensive Income- Translation adjustment 21750 Total Credits 399240 b) 1 Record the purchase of Ship Inc Debit Credit Investment in Ship Inc $158,400 To Cash $158,400 2 Record the dividend received from the foreign subsidiary Cash 9120 To Investment in Ship Inc 9120 3 Record the equity in the net income of the foreign subsidiary Investment in Ship Inc common income from subsidiary 55950 To Equity in net income of foreign subsidiary 55950 153000-83400-24000-11400+21750 Schedule 1 Determining the differential for 2015 Investment cost at 01st Jan 2015 158400 Less: Book value of net assets acquired on 01st Jan 2015 126000 (700000*0.18) 32400 Differential allocated to Property,plant and equipment $18,000 Patent 32400-18000 $14,400 32400 Schedule 2 Determining the differential amortization for 2015 NKr Exchange Rate $ Property, plant and equipment: Income statement: Difference at beginning of year 100000 0.18 18000 Amortization for 2015 -10000 0.2 -2000 (100000/10) Remaining Balances 90000 16000 Balance Sheet Remaining Balances to be transalated at yr end exchange rate 90000 0.21 18900 Difference to other comprehensive income- translation adjustment -2900 Patent Difference at beginning of year 80000 0.18 14400 Amortization for 2015 -20000 0.2 -4000 (100000/5) Remaining Balances 60000 10400 Balance Sheet Remaining Balances to be transalated at yr end exchange rate 60000 0.21 12600 Difference to other comprehensive income- translation adjustment -2200 Income from subsidiary 5100 To Investment in Ship Inc 5100 (2900+2200) Investment in Ship Inc 6000 To other comprehensive income-translation adjustment 6000 (4000+2000) c Pirate\'s consolidated net income for 2015 Income from Pirate\'s income 230000 Add: Income from the Ship Inc 55950 Less:Amortization of differential -5100 Add: Translation adjustment(6540) 6000 Pirate\'s consolidated net income for 2015 286850 d Pirate\'s consolidated stockholder\'s equity at Dec 2015 Pirate\'s shareholders equity 3500000 Add: Net Income 286850 Less: dividends declared -140000 Shareholder\'s equity 3646850