On January 1, 2019, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $137,700. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbel’s books. Simbel had no retained earnings at the date of acquisition. The following are the 2020 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (£E), respectively. les $ 222,400 £E 864,500 Cost of goods sold (105,000 ) (453,700 ) Salary expense (21,800 ) (79,600 ) Rent expense (8,400 ) (48,800 ) Other expenses (25,200 ) (63,200 ) Dividend income—from Simbel 17,600 0 Gain on sale of building, 10/1/20 0 44,000 Net income $ 79,600 £E 263,200 Retained earnings, 1/1/20 $ 332,000 £E 144,200 Net income 79,600 263,200 Dividends (38,000 ) (64,000 ) Retained earnings, 12/31/20 $ 373,600 £E 343,400 Cash and receivables $ 112,200 £E 161,400 Inventory 99,400 327,800 Prepaid expenses 30,000 0 Investment in Simbel (initial value) 137,700 0 Property, plant, and equipment (net) 442,800 469,000 Total assets $ 822,100 £E 958,200 Accounts payable $ 66,400 £E 58,200 Notes payable—due in 2023 155,300 144,200 Common stock 134,000 254,000 Additional paid-in capital 92,800 158,400 Retained earnings, 12/31/20 373,600 343,400 Total liabilities and equities $ 822,100 £E 958,200 Additional Information During 2019, the first year of joint operation, Simbel reported income of £E 177,000 earned evenly throughout the year. Simbel declared a dividend of £E 32,800 to Cayce on June 1 of that year. Simbel also declared the 2020 dividend on June 1. On December 9, 2020, Simbel classified a £E 11,400 expenditure as a rent expense, although this payment related to prepayment of rent for the first few months of 2021. The exchange rates for 1 £E are as follows: January 1, 2019 $ 0.300 June 1, 2019 0.290 Weighted average rate for 2019 0.288 December 31, 2019 0.280 June 1, 2020 0.275 October 1, 2020 0.273 Weighted average rate for 2020 0.274 December 31, 2020 0.270 Translate Simbel’s 2020 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.

On January 1, 2019, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $137,700. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbel’s books. Simbel had no retained earnings at the date of acquisition. The following are the 2020 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (£E), respectively. les $ 222,400 £E 864,500 Cost of goods sold (105,000 ) (453,700 ) Salary expense (21,800 ) (79,600 ) Rent expense (8,400 ) (48,800 ) Other expenses (25,200 ) (63,200 ) Dividend income—from Simbel 17,600 0 Gain on sale of building, 10/1/20 0 44,000 Net income $ 79,600 £E 263,200 Retained earnings, 1/1/20 $ 332,000 £E 144,200 Net income 79,600 263,200 Dividends (38,000 ) (64,000 ) Retained earnings, 12/31/20 $ 373,600 £E 343,400 Cash and receivables $ 112,200 £E 161,400 Inventory 99,400 327,800 Prepaid expenses 30,000 0 Investment in Simbel (initial value) 137,700 0 Property, plant, and equipment (net) 442,800 469,000 Total assets $ 822,100 £E 958,200 Accounts payable $ 66,400 £E 58,200 Notes payable—due in 2023 155,300 144,200 Common stock 134,000 254,000 Additional paid-in capital 92,800 158,400 Retained earnings, 12/31/20 373,600 343,400 Total liabilities and equities $ 822,100 £E 958,200 Additional Information During 2019, the first year of joint operation, Simbel reported income of £E 177,000 earned evenly throughout the year. Simbel declared a dividend of £E 32,800 to Cayce on June 1 of that year. Simbel also declared the 2020 dividend on June 1. On December 9, 2020, Simbel classified a £E 11,400 expenditure as a rent expense, although this payment related to prepayment of rent for the first few months of 2021. The exchange rates for 1 £E are as follows: January 1, 2019 $ 0.300 June 1, 2019 0.290 Weighted average rate for 2019 0.288 December 31, 2019 0.280 June 1, 2020 0.275 October 1, 2020 0.273 Weighted average rate for 2020 0.274 December 31, 2020 0.270 Translate Simbel’s 2020 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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100%

les	$	222,400		£E	864,500
Cost of goods sold		(105,000	)		(453,700	)
Salary expense		(21,800	)		(79,600	)
Rent expense		(8,400	)		(48,800	)
Other expenses		(25,200	)		(63,200	)
Dividend income—from Simbel		17,600			0
Gain on sale of building, 10/1/20		0			44,000
Net income	$	79,600		£E	263,200
Retained earnings, 1/1/20	$	332,000		£E	144,200
Net income		79,600			263,200
Dividends		(38,000	)		(64,000	)
Retained earnings, 12/31/20	$	373,600		£E	343,400
Cash and receivables	$	112,200		£E	161,400
Inventory		99,400			327,800
Prepaid expenses		30,000			0
Investment in Simbel (initial value)		137,700			0
Property, plant, and equipment (net)		442,800			469,000
Total assets	$	822,100		£E	958,200
Accounts payable	$	66,400		£E	58,200
Notes payable—due in 2023		155,300			144,200
Common stock		134,000			254,000
Additional paid-in capital		92,800			158,400
Retained earnings, 12/31/20		373,600			343,400
Total liabilities and equities	$	822,100		£E	958,200

Additional Information

During 2019, the first year of joint operation, Simbel reported income of £E 177,000 earned evenly throughout the year. Simbel declared a dividend of £E 32,800 to Cayce on June 1 of that year. Simbel also declared the 2020 dividend on June 1.
On December 9, 2020, Simbel classified a £E 11,400 expenditure as a rent expense, although this payment related to prepayment of rent for the first few months of 2021.
The exchange rates for 1 £E are as follows:


January 1, 2019	$	0.300
June 1, 2019		0.290
Weighted average rate for 2019		0.288
December 31, 2019		0.280
June 1, 2020		0.275
October 1, 2020		0.273
Weighted average rate for 2020		0.274
December 31, 2020		0.270

Translate Simbel’s 2020 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.

Translation worksheet attached.

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