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On January 1, 2016, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $148,500. Cayce is a U.S.-based

On January 1, 2016, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $148,500. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbels books. Simbel had no retained earnings at the date of acquisition. Following are the 2017 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (E), respectively.

Cayce Corporation Simbel Company
Sales $ 241,600 E 919,700
Cost of goods sold (114,600 ) (482,500 )
Salary expense (24,200 ) (84,400 )
Rent expense (9,600 ) (51,200 )
Other expenses (28,800 ) (66,800 )
Dividend incomefrom Simbel 20,900 0
Gain on sale of building, 10/1/17 0 56,000
Net income $ 85,300 E 290,800
Retained earnings, 1/1/17 $ 344,000 E 153,800
Net income 85,300 290,800
Dividends (50,000 ) (76,000 )
Retained earnings, 12/31/17 $ 379,300 E 368,600
Cash and receivables $ 113,400 E 174,600
Inventory 100,600 354,200
Prepaid expenses 30,000 0
Investment in Simbel (initial value) 148,500 0
Property, plant & equipment (net) 481,200 481,000
Total assets $ 873,700 E 1,009,800
Accounts payable $ 71,200 E 61,800
Notes payabledue in 2020 176,000 147,800
Common stock 146,000 266,000
Additional paid-in capital 101,200 165,600
Retained earnings, 12/31/17 379,300 368,600
Total liabilities and equities $ 873,700 E 1,009,800

Additional Information

  • During 2016, the first year of joint operation, Simbel reported income of E 189,000 earned evenly throughout the year. Simbel declared a dividend of E 35,200 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 12,600 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, 2016 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 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.

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