On January 1,20X8,Pullman Corporation Acquired 75 Percent Interest in Steamship

question 25

Multiple Choice

On January 1,20X8,Pullman Corporation acquired 75 percent interest in Steamship Company for $300,000.Steamship is a Norwegian company.The recording 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.Pullman 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,what amount of translation adjustment is required for increase in differential?

• A)$3,000
• B)$5,500
• C)$4,500
• D)$5,000

Understand the financial metrics related to company's operation cycle.

Compute and interpret times interest earned ratio.

Determine a company's book value per share and its implications.

Understand the classification of different cash flows into operating, investing, and financing activities.

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Definitions:

Prevalent

Widespread in a particular area at a particular time; commonly occurring or accepted.

Moral Hazard

A situation where one party is more likely to take risks because another party bears the cost of those risks.

Agent

A person who is performing an act for another person, called the principal

Principal

A person for whom another person, called the agent, is performing some act.