Question
On January 1, 2016, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $131,400. 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 $131,400. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbels books. Simbel had no retained earnings at the date of acquisition. Following are the 2017 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (E), respectively.
Cayce Corporation | Simbel Company | ||||||
Sales | $ | 211,200 | E | 832,300 | |||
Cost of goods sold | (99,400 | ) | (436,900 | ) | |||
Salary expense | (20,400 | ) | (76,800 | ) | |||
Rent expense | (7,700 | ) | (47,400 | ) | |||
Other expenses | (23,100 | ) | (61,100 | ) | |||
Dividend incomefrom Simbel | 15,675 | 0 | |||||
Gain on sale of building, 10/1/17 | 0 | 37,000 | |||||
Net income | $ | 76,275 | E | 247,100 | |||
Retained earnings, 1/1/17 | $ | 325,000 | E | 138,600 | |||
Net income | 76,275 | 247,100 | |||||
Dividends | (31,000 | ) | (57,000 | ) | |||
Retained earnings, 12/31/17 | $ | 370,275 | E | 328,700 | |||
Cash and receivables | $ | 111,500 | E | 153,700 | |||
Inventory | 98,700 | 312,400 | |||||
Prepaid expenses | 30,000 | 0 | |||||
Investment in Simbel (initial value) | 131,400 | 0 | |||||
Property, plant & equipment (net) | 420,400 | 462,000 | |||||
Total assets | $ | 792,000 | E | 928,100 | |||
Accounts payable | $ | 63,600 | E | 56,100 | |||
Notes payabledue in 2020 | 143,225 | 142,100 | |||||
Common stock | 127,000 | 247,000 | |||||
Additional paid-in capital | 87,900 | 154,200 | |||||
Retained earnings, 12/31/17 | 370,275 | 328,700 | |||||
Total liabilities and equities | $ | 792,000 | E | 928,100 | |||
Additional Information
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During 2016, the first year of joint operation, Simbel reported income of E 170,000 earned evenly throughout the year. Simbel declared a dividend of E 31,400 to Cayce on June 1 of that year. Simbel also declared the 2017 dividend on June 1.
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On December 9, 2017, Simbel classified a E 10,700 expenditure as a rent expense, although this payment related to prepayment of rent for the first few months of 2018.
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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.
I included my answer so far below. I am stuck on the cumulative translation loss/gain.
Sales | (832,300)selected answer correct | 0.274selected answer correct | (228,050)selected answer correct |
Cost of goods sold | 436,900selected answer correct | 0.274selected answer correct | 119,711selected answer correct |
Salary expense | 76,800selected answer correct | 0.274selected answer correct | 21,043selected answer correct |
Rent expense (adjusted) | 36,700selected answer correct | 0.274selected answer correct | 10,056selected answer correct |
Other expenses | 61,100selected answer correct | 0.274selected answer correct | 16,741selected answer correct |
Gain on sale of fixed asset, 10/1/17 | (37,000)selected answer correct | 0.273selected answer correct | (10,101)selected answer correct |
Net income | (257,800) | (70,600)not attempted | |
Retained earnings, 1/1/17 | (138,600)selected answer correct | not attempted | (39,854)selected answer correct |
Net income | (257,800) | (70,600) | |
Dividends | 57,000selected answer correct | 0.275selected answer correct | 15,675selected answer correct |
Retained earnings, 12/31/17 | (339,400) | (94,779) | |
Cash and receivables | 153,700selected answer correct | 0.270selected answer correct | 41,499selected answer correct |
Inventory | 312,400selected answer correct | 0.270selected answer correct | 84,348selected answer correct |
Prepaid rent (adjusted) | 10,700selected answer correct | 0.270selected answer correct | 2,889selected answer correct |
Property, plant & equipment | 462,000selected answer correct | 0.270selected answer correct | 124,740selected answer correct |
Total assets | 938,800 | 253,476 | |
Accounts payable | (56,100)selected answer correct | 0.270selected answer correct | (15,147)selected answer correct |
Notes payable | (142,100)selected answer correct | 0.270selected answer correct | (38,367)selected answer correct |
Common stock | (247,000)selected answer correct | 0.300selected answer correct | (74,100)selected answer correct |
Additional paid-in capital | (154,200)selected answer correct | 0.300selected answer correct | (46,260)selected answer correct |
Retained earnings, 12/31/17 | (339,400) | (94,779) | |
Subtotal | (938,800) | (268,653)not attempted | |
Cumulative translation adjustment (negative)selected answer correct | not attempted | not attempted | not attempted |
Total liabilities and equities | (938,800) | (268,653)not attempted |
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