The trial balances of Charles Company and its subsidiary, Lehto, Inc., are as follows on December 31,

Question:

The trial balances of Charles Company and its subsidiary, Lehto, Inc., are as follows on December 31, 2017:

Current Assets Depreciable Fixed Assets Accumulated Depreciation Investment in Lehto, Inc. Liabilities Common

On January 1, 2015, Charles Company exchanges 20,000 shares of its common stock, with a fair value of $20 per share, for all the outstanding stock of Lehto, Inc. Fixed assets with a 10-year life are understated by $50,000. Any excess of cost over book value is attributed to goodwill. The stockholders’ equity of Lehto, Inc., on the purchase date is as follows:

Common stock ($5 par) Paid-in capital in excess of par Retained earnings Total equity $ 50,000 15,000 135,000

Required

1. Prepare a determination and distribution of excess schedule for the investment. (A value analysis schedule is not needed.)
2. Prepare the 2017 consolidated statements, including the income statement, retained earnings statement, and balance sheet. (A worksheet is not required.)

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