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ACC - On January 1, 20X8, Transport Corporation acquired 75 percent interest in Steamship Company

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Question;On January 1, 20X8, Transport Corporation acquired 75 percent interest in Steamship Company for $300,000. Steamship is a Norwegian company. The local currency is the Norwegian kroner (NKr). The acquisition resulted in an excess of cost-over-book value of $25,000 due solely to a patent having a remaining life of 5 years. Transport uses the fully adjusted equity method to account for its investment. Steamship's December 31, 20X8, trial balance has been translated into U.S. dollars, requiring a translation adjustment debit of $8,000. Steamship's net income translated into U.S. dollars is $35,000. It declared and paid an NKr 20,000 dividend on June 1, 20X8. Relevant exchange rates are as follows:Jan 1, 2008 NKrl=$0.20June 1, 2008 NKrl =$0.23Dec 31, 2008 NKrl=$0.24Average 2008 NKrl=$0.22Assume the kroner is the functional currency. Based on the preceding information, in the journal entry to record the receipt of dividend from Steamship,A. Investment in Steamship Company will be credited for $3,450.B. Cash will be debited for $3,300.C. Investment in Steamship Company will be credited for $4,000.D. Cash will be debited for $3,600.

 

Paper#42349 | Written in 18-Jul-2015

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