On January 1, 2019, Aspen Company acquired 80 percent of Birch Company’s voting stock for $288,000. Birch reported a $300,000 book value, and the fair value of the noncontrolling interest was $72,000 on that date. Then, on January 1, 2023, Birch acquired 80 percent of Cedar Company for $104,000 when Cedar had a $100,000 book value and the 20 percent noncontrolling interest was valued at $26,000. In each acquisition, the subsidiary’s excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life.

These companies report the following financial information. Investment income figures are not included.

Assume that each of the following questions is independent:

a. If all companies use the equity method for internal reporting purposes, what is the December 31, 2023, balance in Aspen’s Investment in Birch Company account?

b. What is the consolidated net income for this business combination for 2024?

c. What is the net income attributable to the noncontrolling interest in 2024?

d. Assume that Birch made intra-entity inventory transfers to Aspen that have resulted in the following intra-entity gross profits in inventory at the end of each year:

What is the accrual-based net income of Birch in 2023 and 2024, respectively?

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Sales: Aspen Company Birch Company Cedar Company. Expenses: Aspen Company. Birch Company. Cedar Company Dividends declared: Aspen Company Birch Company Cedar Company 2022 $415,000 $545,000 200,000 280,000 Not available 160,000 $310,000 160,000 Not available 2023 $ 20,000 10,000 Not available $420,000 220,000 150,000 $ 40,000 20,000 2,000 2024 $688,000 400,000 210,000 $510,000 335,000 180,000 $ 50,000 20,000 10,000