On January 1, 20X8, Transport Corporation Acquired 75 Percent Interest

question 28

Multiple Choice

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: Assume 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.

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