On January 1, 2016, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $144,900. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbels books. Simbel had no retained earnings at the date of acquisition. Following are the 2017 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (E), respectively.

Cayce

Corporation

Simbel

Company

Sales $ 235,200

E 901,300

Cost of goods sold

(111,400 )

(472,900 )

Salary expense

(23,400 )

(82,800 )

Rent expense

(9,200 )

(50,400 )

Other expenses

(27,600 )

(65,600 )

Dividend incomefrom Simbel

19,800

0

Gain on sale of building, 10/1/17

0

52,000

Net income $ 83,400

E 281,600

Retained earnings, 1/1/17 $ 340,000

E 150,600

Net income

83,400

281,600

Dividends

(46,000 )

(72,000 )

Retained earnings, 12/31/17 $ 377,400

E 360,200

Cash and receivables $ 113,000

E 170,200

Inventory

100,200

345,400

Prepaid expenses

30,000

0

Investment in Simbel (initial value)

144,900

0

Property, plant & equipment (net)

468,400

477,000

Total assets $ 856,500

E 992,600

Accounts payable $ 69,600

E 60,600

Notes payabledue in 2020

169,100

146,600

Common stock

142,000

262,000

Additional paid-in capital

98,400

163,200

Retained earnings, 12/31/17

377,400

360,200

Total liabilities and equities $ 856,500

E 992,600

Additional Information

During 2016, the first year of joint operation, Simbel reported income of E 185,000 earned evenly throughout the year. Simbel declared a dividend of E 34,400 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 12,200 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 $ 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 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 TRANSLATION WORKSHEET Egyptian Exchange Pounds Dollars Account Rate ed Sales Cost of goods sold Salary expense Rent expense (adjusted) k Other expenses Gain on sale of fixed asset, 10/1/17 0 Net income Retained earnings, 1/1/17 Net income Dividends C Retained earnings, 12/31/17 Cash and receivables ces Inventory Prepaid rent (adjusted) Property, plant & equipment 0 Total assets 0 Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings, 12/31/17 Subtotal 0 Total liabilities and equities 0 K Prev 1 of 2 MacBook Pro Saved gnmenti Eliminations Balances Simbel Dollars Cayce Dollars Credit Dollars Debit Account Sales Cost of goods sold Salary expense Rent expense Other expenses Dividend income Gain on sale of fixed asset, 10/1/17 0 Net income 0 Retained earnings, 1/1/17 Net income Dividends 0 0 Retained earnings, 12/31/17 Cash and receivables Inventory Prepaid rent Investment Property, plant & equipment 0 0 Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained eanings, 12/31/17 Subtotal 0 0 Total liabilities and equities 0 1 of 2 Prev Next > MacBook Pro CAYCE CORPORATION TRANSLATION WORKSHEET Egyptian Exchange Pounds Dollars Account Rate ed Sales Cost of goods sold Salary expense Rent expense (adjusted) k Other expenses Gain on sale of fixed asset, 10/1/17 0 Net income Retained earnings, 1/1/17 Net income Dividends C Retained earnings, 12/31/17 Cash and receivables ces Inventory Prepaid rent (adjusted) Property, plant & equipment 0 Total assets 0 Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings, 12/31/17 Subtotal 0 Total liabilities and equities 0 K Prev 1 of 2 MacBook Pro Saved gnmenti Eliminations Balances Simbel Dollars Cayce Dollars Credit Dollars Debit Account Sales Cost of goods sold Salary expense Rent expense Other expenses Dividend income Gain on sale of fixed asset, 10/1/17 0 Net income 0 Retained earnings, 1/1/17 Net income Dividends 0 0 Retained earnings, 12/31/17 Cash and receivables Inventory Prepaid rent Investment Property, plant & equipment 0 0 Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained eanings, 12/31/17 Subtotal 0 0 Total liabilities and equities 0 1 of 2 Prev Next > MacBook Pro