Cayce Corporation Simbel Company $ 200,000 (93,800) (19,000) (7,000) (21,000) 13,750 £E 800,000 (420,000) (74,000) (46,000) (59,000) -0- Sales Cost of goods sold Salary expense Rent expense Other expenses Dividend income-from Simbel Gain on sale of building, 10/1/17 -0- 30,000 Net income $ 72,950 £E 231,000 Retained earnings, 1/1/17 Net income ... $ 318,000 72,950 £E 133,000 231,000 (50,000) £E 314,000 Dividends (24,000) $ 366,950 Retained earnings, 12/31/17 $ 110,750 98,000 30,000 126,000 £E 146,000 297,000 Cash and receivables Inventory. Prepaid expenses Investment in Simbel (initial value) Property, plant & equipment (net) -0- 398,000 455,000 $ 762,750 $ 60,800 Total assets £E 898,000 Accounts payable ... Notes payable-due in 2020 £E 54,000 132,000 140,000 Common stock 120,000 240,000 Additional paid-in capital 83,000 150,000 Retained earnings, 12/31/17 366,950 314,000 Total liabilities and equities $ 762,750 £E 898,000 January 1, 2016 .. June 1, 2016.... Weighted average rate for 2016. December 31, 2017.... June 1, 2017. October 1, 2017..... Weighted average rate for 2017. December 31, 2017.. $0.300 0.288 0.280 0.275 0.273 0.274 0.270
On January 1, 2016, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $126,000. 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
Additional Information
• During 2016, the first year of joint operation, Simbel reported income of $E 163,000 earned evenly throughout the year. Simbel declared a dividend of $E 30,000 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 10,000 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:
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.
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