On January 1, 2016, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $126,900. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbels books. Simbel had no retained earnings at the date of acquisition. Following are the 2017 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (E), respectively.
Translate Simbels 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 subsidiarys functional currency.
Cayce Corporation $ 203,200 (95, 400) (19,400) (7,200) (21,600) 14,300 Simbel Company E 809,300 (424,900) (74,800) (46,400) (59,600) Sales Cost of goods sold Salary expense Rent expense Other expenses Dividend income-from Simbel Gain on sale of building, 10/1/17 Net income Retained earnings, 1/1/17 Net income Dividends Retained earnings, 12/31/17 Cash and receivables Inventory Prepaid expenses Investment in Simbel (initial value) Property, plant & equipment (net) Total assets Accounts payable Notes payable-due in 2020 Common stock Additional paid-in capital Retained earnings, 12/31/17 Total liabilities and equities 32,000 E 235,600 E 134,600 235,600 (52,000) E 318,200 E 148,200 301,400 $ 73,900 $ 320,000 73,900 (26,000) $367,900 $ 111,000 98, 200 30,000 126,900 404,400 $ 770,500 $ 61,600 134,600 122,000 84,400 367,900 $ 770,500 457,000 E 906,600 E 54,600 140,600 242,000 151,200 318, 200 E 906,600 Additional Information . During 2016, the first year of joint operation, Simbel reported income of E 165,000 earned evenly throughout the year. Simbel declared a dividend of E 30,400 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 10,200 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 June 1, 2016 Weighted average rate for 2016 December 31, 2016 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 Translation Worksheet Consolidation Worksheet Prepare a Translation worksheet. (Round "Exchange Rate" answers to 3 decimal places. Round your "Dollars" answers to the nearest whole number. Amounts to be deducted and negative amounts should be indicated with a minus sign.) Exchange Rate CAYCE CORPORATION TRANSLATION WORKSHEET Egyptian Account Pounds Sales Cost of goods sold Salary expense Rent expense (adjusted) Other expenses 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 Total liabilities and equities Translation Worksheet Consolidation Worksheet Prepare a Consolidation worksheet. (Round "Exchange Rate" answers to 3 decimal places. Amounts to be deducted and negative amounts should be indicated with a minus sign.) CAYCE CORPORATION Consolidation Worksheet Consolidated Adjustments and Eliminations Cayce Dollars Account Balances Dollars Simbel Dollars Debit Credit 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
