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On January I, $20$X$3,$ before acquiring Coyote, Acme Corporation acquired $100\backslash \%$ of Simbel Company for consideration transferred with a fair value of $\backslash (\backslash$$ $126,000\backslash ).$ Acme is a U$.$S$.-$based company headquartered in Fairfield, New Jersey, and Simbel is in Cairo, Egypt. Acme accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbel's books. Simbel had no retained earnings at the date of acquisition. The following are the $20$X$4$ financial statements for the two operations. Information for Acme and for Simbel is in U$.$S$.$ dollars $(\backslash$$$)$ and Egyptian pounds $(\backslash (\backslash$mathrm$\{$E$\}\backslash )),$ respectively.

June $1.$

On December $\backslash (9,20\backslash$times $4\backslash ),$ Simbel classified a $\backslash (\backslash$mathrm$\{$fE$\}10,000\backslash )$ expenditure as a rent expense, although this payment related to prepayment of rent for the first few months of $\backslash (20\backslash$times $5\backslash ).$

The exchange rates for $1$ fE are as follows: Step One

Simbel's financial statements are first translated into U$.$S$.$ dollars after reclassification of the $\backslash (\backslash$mathbf$\{$f E$\}\backslash$mathbf$\{10,000\}\backslash )-$pound expenditure for rent from rent expense to prepaid rent. Credit balances are in parentheses. Step Two

Acme and Simbel's U$.$S$.$ dollar accounts are then consolidated. Necessary consolidation entries are made in the consolidation worksheet.

Sales

Cost of goods sold

Salary expense

Rent expense

Other expenses

Dividend income

Gain, $10/1/$X$3$

Net income

Ret earn, $\backslash (1/1/\backslash )$ X$3$

Net income

Dividends

Ret earn, $12/31/$X$3$

Cash and receivables

Inventory

Prepaid rent

Investment

Property, plant, $\backslash$& equipment

Total

Accounts payable

Notes payable

Common stock

Additional PIC

Ret earn, $12/31/$X$3$

Subtotal

Cumulative translation adjustment

Total