Reference no: EM13576070

The trial balances of charles Company and its subsidiary, Letho, Inc., are as follows on December 31, 2013:

                                                                                Charles                                   Lehto

Current Assets...................................................... 590,000                                    130,000

Depreciable Fixed Assets.................................... 1,805,000                                   440,000

Accumulated Depreciation.................................... (405,000)                                 (70,000)

Investment in Lehto, Inc........................................ 400,000

Liabilities .............................................................. (900,000)                                 (225,000)

Common stock ($1 par) ....................................... (200,000)               

Common Stock ($5 Par)........................................                                                  (50,000)

Paid in Capital in Excess of par............................. (1,040,000)                              (15,000)

Retained Earnings, January 1, 2013...................... (230,0000                               (170,000)

Revenues............................................................... (460,000)                                (210,000)

Expenses................................................................ 450,000                                   170,000

Dividends Declared................................................... 10,000                                                   

Totals..............................................................                 0                                                 0

On January 1, 2011 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 10-year life understated by 50,000. Any excess of cost over book value is attributed to goodwill. The stockholders' equity of Lehto, Inc., on purchase date is as follows:

Common stock ($5 par)....................................... $    50,000

Paid-in capital in excess of par............................       15,000

Retained earnings.................................................     135,000

Total equity.....................................................       $200,000

1) prepare a determination and distribution of excess schule for investment. (A value analysis schedule is not needed.)

2) prepare the 2013 consolidated statements, includeing the income statement, retained earnings statement, and balance sheet

Problem 3-4    Charles Company and Subsidiary Lehto, Inc.
		Company Implied Fair Value		Parent Price (100%)		NCI Value (0%)
Fair value of subsidiary
Less book value of interest acquired:
	Common Stock
	Paid-In Capital in excess of par
	Retained Earnings
	Total Equity
	Interest acquired			100%
	Book Value
	Excess of fair value over book value
Adjustment of identifiable accounts:
		Adjustment		Worksheet Key		Life	Amortization per year
	Fixed Assets			debit D1		10	$        5,000
	Goodwill			debit D2
	Total
	Charles Company and Subsidiary Lehto, Inc.
	Consolidated Income Statement
	For Year Ended December 31, 2013
	Revenue
	Expenses
	Consolidated net income						$      45,000
	Charles Company and Subsidiary Lehto, Inc.
	Retained Earnings Statement
	For Year Ended December 31, 2013
	Retained Earnings, Charles Company, January 01, 2013
	Add consolidated net income						$      45,000
	Less dividends declared
	Balance, December 31, 2013						$    300,000
	Charles Company and Subsidiary Lehto, Inc.
	Consolidated Balance Sheet
	For Year Ended December 31, 2013
	Assets
	Current assets
	Depreciable fixed assets
	Less Accumulated Depreciation
	Goodwill
	Total assets
	Liabilities and Stockholders' Equity
	Liabilities
	Stockholders' Equity:
	Common Stock
	Paid-in Capital in excess of par
	Retained earnings
	Total liabilities and stockholders' equity