On January 1, 2016, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $126,000. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbel's books. Simbel had no retained earnings at the date of acquisition. Following are the 2017 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds ($E), respectively.

Additional Information ∙ During 2016, the first year of joint operation, Simbel reported income of $E 163,000 earned evenly throughout the year. Simbel declared a dividend of $E 30,000 to Cayce on June 1 of that year. Simbel also declared the 2017 dividend on June 1. ∙ On December 9, 2017, Simbel classified a $E 10,000 expenditure as a rent expense, although this payment related to prepayment of rent for the first few months of 2018. ∙ The exchange rates for 1 $E are as follows:

 

January 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.300

June 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …0.290

Weighted average rate for 2016 . . . . . . . . . . . . . . . . . . . . . . . . . ……0.288

December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ….0.280

June 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ….0.275

October 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …...0.273

Weighted average rate for 2017 . . . . . . . . . . . . . . . . . . . . . . . . ……..0.274

December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ….0.270

Translate Simbel’s 2017 financial statements into U.S. dollars and prepare a consolidation worksheet for Cayce and its Egyptian subsidiary. Assume that the Egyptian pound is the subsidiary’s functional currency.

Transcribed Image Text:

Cayce Simbel Corporation $ 200,000 (93,800) (19,000) Company Sales Cost of goods solo Salary expense Rent expense Other expenses Dividend Income-from Simbel Galn on sale of bullding, 10/1/17 CE 800,000 (420,000) (74,000) (46,000) (59,000) (7,000) (21,000) 13,750 30,000 CE 231.000 CE 133,000 231,000 Net Income $ 72,950 Retained earnings, 1/1/17 Net Income Dividends $318,000 72,950 24 $366,950 $110,750 98,000 30,000 126,000 398,000 $762,750 $ 60,800 132,000 120,000 83,000 366,950 $762,750 Retalned earnings, 12/31/17 Cash and recelvables Inventory Prepald expenses Investment In Simbel (Initial value) Property, plant & equipment (net) CE 314,000 CE 146,000 297,000 455,000 CE 898,000 Total assets Accounts payable Notes payable-due In 2020 Common stock Additional pald-In capital Retained earnings, 12/31/17 CE 54,000 140,000 240,000 150,000 314,000 CE 898,000 Total llablities and equities