Problem

On January 1, 2010, Cayce Corporation acquired 100 percent of Simbel Company for considera...

On January 1, 2010, Cayce Corporation acquired 100 percent of Simbel Company for consideration paid of $126,000, which was equal to fair value. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the cost method. Any excess of fair value over book value is attributable to undervalued land on Simbel’s books. Simbel had no retained earnings at the date of acquisition. Following are the 2011 financial statements for the two operations. Information for Cayce is in U.S. dollars ($) and for Simbel is in Egyptian pounds (£E).

	Cayce Corporation	Simbel Company
Sales	$200,000	£E 800,000
Cost of goods sold	(93,800)	(420,000)
Salary expense	(19,000)	(74,000)
Rent expense	(7,000)	(46,000)
Other expenses	(21,000)	(59,000)
Dividend income—from Simbel	13,750	–0–
Gain on sale of fixed asset, 10/1/11	–0–	30,000
Net income	$ 72,950	£E 231,000
Retained earnings, 1/1/11	$318,000	£E 133,000
Net income	72,950	231,000
Dividends paid	(24,000)	(50,000)
Retained earnings, 12/31/11	$366,950	£E 314,000
Cash and receivables	$110,750	£E 146,000
Inventory	98,000	297,000
Prepaid expenses	30,000	–0–
Investment in Simbel (cost)	126,000	–0–
Fixed assets (net)	398,000	455,000
Total assets	$762,750	£E 898,000
Accounts payable	$ 60,800	£E 54,000
Notes payable—due in 2013	132,000	140,000
Common stock	120,000	240,000
Additional paid-in capital	83,000	150,000
Retained earnings, 12/31/11	366,950	314,000
Total liabilities and equities	$762,750	£E 898,000

Additional Information

• During 2010, the first year of joint operation, Simbel reported income of £E 163,000 earned evenly throughout the year. Simbel paid a dividend of £E 30,000 to Cayce on June 1 of that year. Simbel also paid the 2011 dividend on June 1.

• On December 9, 2011, Simbel classified a £E 10,000 expenditure as a rent expense, although this payment related to prepayment of rent for the first few months of 2012.

• The exchange rates for 1 £E are as follows:

January 1, 2010	$0.300
June 1, 2010	0.290
Weighted average rate for 2010	0.288
December 31, 2010	0.280
June 1, 2011	0.275
October 1, 2011	0.273
Weighted average rate for 2011	0.274
December 31, 2011	0.270

Translate Simbel’s 2011 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.