On January 1, 2016, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $145,800. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbel's books. Simbel had no retained earnings at the date of acquisition. Following are the 2017 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (E), respectively. Cayce Corporation $ 236,800 (112,200) (23,600) (9,300) (27,900) 20, 075 0 Simbel Company E 905,900 (475, 300) (83,200) (50, 600) (65,900) 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 53,000 E 283,900 E 151,400 283,900 (73,000) E 362,300 E 171,300 347,600 $ 83,875 $ 341,000 83,875 (47,000 $ 377,875 $ 113, 100 100,300 30,000 145,800 471,600 $ 860,800 $ 70,000 170,825 143,000 99, 100 377,875 $ 860,800 478,000 E 996,900 EE 60,900 146,900 263,000 163,800 362,300 E 996,900 Additional information Additional Information During 2016, the first year of joint operation, Simbel reported income of E 186,000 earned evenly throughout the year. Simbel declared a dividend of E 34,600 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 12,300 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 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. CAYCE CORPORATION TRANSLATION WORKSHEET Account Egyptian Pounds Exchange Rate Dollars Sales Cost of goods sold Salary expense Rent expense (adjusted) Other expenses Gain on sale of fixed asset, 10/1/17 Net income 0 0 Retained earnings, 1/1/17 Net income Dividends Retained earnings, 12/31/17 0 0 Cash and receivables Inventory Prepaid rent (adjusted) Property, plant & equipment Total assets Accounts payable Notes payable 0 0 Common stock Additional paid-in capital Retained earnings, 12/31/17 Subtotal 0 0 Total liabilities and equities 0 0 CAYCE CORPORATION Consolidation Worksheet Adjustments and Eliminations Consolidated Balances Account Cayce Dollars Simbel Dollars 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 0 0 0 Dividends 0 0 0 Retained earnings, 12/31/17 Cash and receivables Inventory Prepaid rent Investment 0 0 Property, plant & equipment Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings, 12/31/17 Subtotal 0 0 0 Total liabilities and equities 0 0 0 0 0
