Question

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).


• 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 functionalcurrency.

Sales2
Views245