C) Consolidation Worksheet
On January 1, 2016, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $146,700. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbel's books. Simbel had no retained earnings at the date of acquisition. Following are the 2017 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (EE), respectively. Cayce Corporation Simbel Company EE 910,500 Sales Cost of goods sold Salary expense Rent expense Other expenses Dividend income-from Simbel Gain on sale of building, 10/1/17 238,400 (113,000) (23,800) (9,400) (28,200) 20,350 (477,700) (83,600) (50,800) (66,200) $ 84,350 342,000 84,350 48.000 54,000 EE 286,200 EE 152,200 286,200 Net income Retained earnings, 1/1/17 Net income Dividends 74,000) 378,350 EE 364,400 EE 172,400 349,800 Retained earnings, 12/31/17 Cash and receivables Inventory Prepaid expenses Investment in Simbel (initial value) Property, plant & equipment (net) 113,200 100,400 30,000 146,700 474,800 $865,100 $ 70,400 172,550 144,000 99,800 378,350 $865,100 479,000 EE1,001,200 EE 61,200 147,200 264,000 164,400 364,400 EE1,001,200 Total assets Accounts payable Notes payable-due in 2020 Common stock Additional paid-in capital Retained earnings, 12/31/17 Total liabilities and equities Additional Information During 2016, the first year of joint operation, Simbel reported income of EE 187,000 earned evenly throughout the year. Simbel declared a dividend of SE 34,800 to Cayce on June 1 of that year. Simbel also declared the 2017 dividend on June 1. On December 9, 2017, Simbel classified a SE 12,400 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 SE are as follows: January 1, 2016 June 1, 2016 Weighted average rate for 2016 December 31, 2017 June 1, 2017 october 1, 2017 Weighted average rate for 2017 December 31, 2017 $0.300 0.290 0.288 0.280 0.275 0.273 0.274 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 TRANSLATION WORKSHEET Egyptian Exchange Dollars Rate Account Pounds Sales Cost of goods sold Salary expense Rent expense (adjusted) Other expen Gain on sale of fixed asset, 10/1/17 Net income Retained earnings, 1/1/17 Net income Dividends Retained earnings, 12/31/17 Cash and receivables Inventory Prepaid rent (adjusted) Property, plant & equipment Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings, 12/31/17 Subtotal ses Total liabilities and equities Dollars Simbe Dollars Account Debit Credit Dollars Sales Cost of goods sold Salary expense Rent expense Other expenses Dividend income Gain on sale of fixed asset, 10/1/17 Net income Retained earnings, 1/1/17 Net income Dividends Retained earnings, 12/31/17 Cash and receivables Inventory Prepaid rent Investment Property, plant & equipment Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings, 12/31/17 Subtotal Total liabilities and equities
