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,in the journal entry to record parent's share of subsidiary's translation adjustment:
A)Other Comprehensive Income-Translation Adjustment will be debited for $8,000.
B)Other Comprehensive Income-Translation Adjustment will be credited for $6,000.
C)Investment in Steamship Company will be credited for $6,000.
D)Investment in Steamship Company will be debited for $8,000.

Question

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,in the journal entry to record parent's share of subsidiary's translation adjustment:
A)Other Comprehensive Income-Translation Adjustment will be debited for $8,000. 
B)Other Comprehensive Income-Translation Adjustment will be credited for $6,000. 
C)Investment in Steamship Company will be credited for $6,000. 
D)Investment in Steamship Company will be debited for $8,000.

Quizplus · Accepted Answer

The parent's share of the subsidiary's translation adjustment is recorded by crediting the "Investment in Steamship Company" account, reflecting the increase in the investment's value due to currency translation adjustments.

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