On January 1, 20X5, Taft Company acquired all of the outstanding stock of Vikix, Inc., a Norwegian

On January 1, 20X5, Taft Company acquired all of the outstanding stock of Vikix, Inc., a Norwegian company, at a cost of $156,600. Vikix’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 Vikix’s property, plant, and equipment exceeded its book value by $18,000. The remaining useful life of Vikix’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. Vikix’s trial balance on December 31, 20X5, in kroner, follows:
 

	Debits			Credits
Cash	NKr	152,000
Accounts Receivable (net)		218,000
Inventory		291,000
Property, Plant & Equipment		605,000
Accumulated Depreciation				NKr	159,000
Accounts Payable					101,000
Notes Payable					204,000
Common Stock					460,000
Retained Earnings					240,000
Sales					736,000
Cost of Goods Sold		415,000
Operating Expenses		123,000
Depreciation Expense		53,000
Dividends Paid		43,000
Total	NKr	1,900,000		NKr	1,900,000
Additional Information: 1. Vikix 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. Vikix acquired all of its property, plant, and equipment on July 1, 20X3, and uses straight-line depreciation. 3. Vikix’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. Taft’s income from its own operations was $271,000 for 20X5, and its total stockholders’ equity on January 1, 20X5, was $3,500,000. Taft declared $170,000 of dividends during 20X5. 6. Exchange rates were as follows: NKr $   July 1, 20X3 1 = 0.15   December 30, 20X4 1 = 0.18   January 1, 20X5 1 = 0.18   July 1, 20X5 1 = 0.19   December 15, 20X5 1 = 0.205   December 31, 20X5 1 = 0.21   Average for 20X5 1 = 0.20 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'.) VIKIX INC. Trial Balance Translation December 31, 20X5 Item Balance Dollars Cash Accounts Receivable (net) Inventory Property, Plant and Equipment Cost of Goods Sold Operating Expenses Depreciation Expense Dividends Paid Total $0 Total Debits $0 Accumulated Depreciation Accounts Payable Notes Payable Common Stock Retained Earnings Sales Total $0 Total Credits $0

b.

Assume that Taft 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.)

Income from Taft’s operations for 20X5, exclusive of income from the Norwegian subsidiary Taft’s Net Income $0 Taft’s Consolidated Comprehensive Income $0 d. Compute Taft’s total consolidated stockholders’ equity at December 31, 20X5.