On January 1, 2019, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $126,000. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbel’s books. Simbel had no retained earnings at the date of acquisition. The following are the 2020 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (£E), respectively.

Additional Information

• During 2019, 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 2020 dividend on June 1.
• On December 9, 2020, 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 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.

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Cayce Corporation Simbel Company Sales. Cost of goods sold Salary expense Rent expense Other expenses $ 200,000 (93,800) (19,000) (7.000) (21,000) 13,750 £E 800,000 (420,000) (74,000) (46,000) (59,000) Dividend income-from Simbel -0- Gain on sale of building, 10/1/20 -0- 30,000 Net income $ 72,950 £E 231,000 $ 318,000 72,950 £E 133,000 231.000 (50,000) £E 314,000 Retained earnings, 1/1/20 Net income (24.000) $ 366,950 $ 110,750 Dividends Retained earnings, 12/31/20 £E 146,000 297,000 Cash and receivables Inventory Prepaid expenses Investment in Simbel (initial value) Property, plant, and equipment (net) 98,000 30,000 -0- 126,000 -0- 398,000 455,000 $ 762,750 $ 60,800 132,000 Total assets £E 898,000 Accounts payable Notes payable-due in 2023 Common stock £E 54,000 140,000 120,000 240,000 Additional paid-in capital Retained earnings, 12/31/20 83,000 150,000 366,950 314,000 Total liabilities and equities $ 762,750 £E 898,000