On January 1, 2023, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $127,800. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbel's books. Simbel had no retained earnings at the date of acquisition. The following are the 2024 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (£E), respectively. Sales Cost of goods sold Salary expense Rent expense Other expenses Dividend income-from Simbel Gain on sale of building, 10/1/24 Net income Retained earnings, 1/1/24 Net income Dividends Retained earnings, 12/31/24 Cash and receivables Inventory Prepaid expenses Investment in Simbel (initial value) Property, plant, and equipment (net) Total assets Accounts payable Notes payable-due in 2027 Common stock Additional paid-in capital Retained earnings, 12/31/24 Total liabilities and equities Cayce Corporation $ 204,800 (96,200) (19,600) (7,300) (21,900) 14,575 0 $ 74,375 $ 321,000 74,375 (27,000) $ 368,375 $ 111,100 98,300 30,000 127,800 407,600 $ 774,800 $ 62,000 136,325 123,000 Simbel Company £E 813,900 (427,300) (75,200) (46,600) (59,900) 33,000 £E 237,900 £E 135,400 237,900 (53,000) £E 320,300 £E 149,300 303,600 0 0 458,000 £E 910,900 £E 54,900 140,900 243,000 85,100 151,800 368,375 320,300 $ 774,800 £E 910,900 Additional Information ⚫ During 2023, the first year of joint operation, Simbel reported income of £E 166,000 earned evenly throughout the year. Simbel declared a dividend of £E 30,600 to Cayce on June 1 of that year. Simbel also declared the 2024 dividend on June 1. ⚫ On December 9, 2024, Simbel classified a £E 10,300 expenditure as a rent expense, although this payment related to prepayment of rent for the first few months of 2025. • The exchange rates for 1 £E are as follows: January 1, 2023 June 1, 2023 Weighted average rate for 2023 December 31, 2023 June 1, 2024 October 1, 2024 Weighted average rate for 2024 December 31, 2024 Required: $ 0.300 0.290 0.288 0.280 0.275 0.273 0.274 0.270 Translate Simbel's 2024 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, 2023, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $127,800. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbel's books. Simbel had no retained earnings at the date of acquisition. The following are the 2024 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (£E), respectively. Sales Cost of goods sold Salary expense Rent expense Other expenses Dividend income-from Simbel Gain on sale of building, 10/1/24 Net income Retained earnings, 1/1/24 Net income Dividends Retained earnings, 12/31/24 Cash and receivables Inventory Prepaid expenses Investment in Simbel (initial value) Property, plant, and equipment (net) Total assets Accounts payable Notes payable-due in 2027 Common stock Additional paid-in capital Retained earnings, 12/31/24 Total liabilities and equities Cayce Corporation $ 204,800 (96,200) (19,600) (7,300) (21,900) 14,575 0 $ 74,375 $ 321,000 74,375 (27,000) $ 368,375 $ 111,100 98,300 30,000 127,800 407,600 $ 774,800 $ 62,000 136,325 123,000 Simbel Company £E 813,900 (427,300) (75,200) (46,600) (59,900) 33,000 £E 237,900 £E 135,400 237,900 (53,000) £E 320,300 £E 149,300 303,600 0 0 458,000 £E 910,900 £E 54,900 140,900 243,000 85,100 151,800 368,375 320,300 $ 774,800 £E 910,900 Additional Information ⚫ During 2023, the first year of joint operation, Simbel reported income of £E 166,000 earned evenly throughout the year. Simbel declared a dividend of £E 30,600 to Cayce on June 1 of that year. Simbel also declared the 2024 dividend on June 1. ⚫ On December 9, 2024, Simbel classified a £E 10,300 expenditure as a rent expense, although this payment related to prepayment of rent for the first few months of 2025. • The exchange rates for 1 £E are as follows: January 1, 2023 June 1, 2023 Weighted average rate for 2023 December 31, 2023 June 1, 2024 October 1, 2024 Weighted average rate for 2024 December 31, 2024 Required: $ 0.300 0.290 0.288 0.280 0.275 0.273 0.274 0.270 Translate Simbel's 2024 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.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter9: Acquisitions Of Property

Section: Chapter Questions

Problem 44P

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