On 1/1/17, Paper Corporation purchased 100 percent of Simple Company at a cost of $750,000. Paper is a U.S.-based company and Simple is in Cairo, Egypt. Paper uses the equity method to account for its investment in Simple. Simple had 700,000 LE retained earnings at the acquisition date. Any fair value/book value difference is attributable to a patent with a 10-year life.
During 2017, the first year of joint operation, Simple reported income of 300,000 Egyptian pounds (LE ) which was earned evenly throughout the year. And paid a dividend of 75,000 LE to Paper on June 1.
Simple’s functional currency is the Egyptian pound.
The exchange rates for 1 LE are as follows:
1/1/17                                     $.50
6/1/17                                     $.48
Weighted average 2017       $.46
12/31/17                                  $.44
6/1/18 (dividend date)          $.43
Weighted average 2018       $.42
12/31/18                                  $.40
1. Show that the beginning 2018 Investment in Simple balance on Paper’s books is: $754,600. (Hint: you will need to translate Simple’s income and dividends as well as compute the change in OCI for the year).
2. Prepare the translated financial statements of Simple assuming the equipment sales occurred on 6/1/18.
3. Prepare the consolidation entries and worksheet for Paper and Simple.
4. Prove the change in OCI that you computed for Paper for 2018.

On 1/1/17, Paper Corporation purchased 100 percent of Simple Compan...