Question

On January 1, 2016, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $141,300. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbel’s books. Simbel had no retained earnings at the date of acquisition. Following are the 2017 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (£E), respectively.

	Cayce Corporation				Simbel Company
Sales	$	228,800			£E	882,900
Cost of goods sold		(108,200	)			(463,300	)
Salary expense		(22,600	)			(81,200	)
Rent expense		(8,800	)			(49,600	)
Other expenses		(26,400	)			(64,400	)
Dividend income—from Simbel		18,700				0
Gain on sale of building, 10/1/17		0				48,000
Net income	$	81,500			£E	272,400
Retained earnings, 1/1/17	$	336,000			£E	147,400
Net income		81,500				272,400
Dividends		(42,000	)			(68,000	)
Retained earnings, 12/31/17	$	375,500			£E	351,800
Cash and receivables	$	112,600			£E	165,800
Inventory		99,800				336,600
Prepaid expenses		30,000				0
Investment in Simbel (initial value)		141,300				0
Property, plant & equipment (net)		455,600				473,000
Total assets	$	839,300			£E	975,400
Accounts payable	$	68,000			£E	59,400
Notes payable—due in 2020		162,200				145,400
Common stock		138,000				258,000
Additional paid-in capital		95,600				160,800
Retained earnings, 12/31/17		375,500				351,800
Total liabilities and equities	$	839,300			£E	975,400

Additional Information

• During 2016, the first year of joint operation, Simbel reported income of £E 181,000 earned evenly throughout the year. Simbel declared a dividend of £E 33,600 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 11,800 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 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 Consolidation Worksheet Consolidated Balances Dollars Adjustments and Eliminations Cayce Dollars Simbel Dollars Account 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 18,700 44,766 90,882 112,600 99,800 30,000 141,300 455,600 839,300 157,366 190,682 127,710 263,358 348,048 umulative translation adjustment (negative) Total liabilities and equities 18,700

Answer 1

Answer:-

Translation sheet
Account	Egyptian pounds	rate exchange	$
Sales	882,900	0.288	254275.2
Cogs	(463,300)	0.288	(133430.4)
Salary	(82000)	0.288	(23616)
Rent expense	(50000)	0.288	(14400)
Other expense	(65000)	0.288	(18720)
Dividend.inc	0		0
Gain at a bargain of construct	50000	0.288	14400
Retained earning	338000	0.288	97344
Net income			79776
Dividend	(70000)	0.274	(19180)
Held procuring as on 31.12.17			157940
receivable Cash and	168000	.270	45360
Inventory	341000	.270	92070
Prepaid exp	0
Investment	0
Property plant gear	475000	.270	128250
Total assets			265680
A/cs payable	60000	.270	16200
Notes payable	146000	.270	39420
Common stock	260000	.270	70200
Addition in puc	162000	.270	43740
Retained earnings	356000	.270	96120
Euity Total liability and			261648