7-1 Connect: Module 7 Homework

You can also view the attached file for more info.

On January 1, 2012, Aspen Company acquired 80 percent of Birch Company?s outstanding voting stock for $396,000. Birch reported a $420,000 book value and the fair value of the noncontrolling interest was $99,000 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $188,000 when Cedar had a $181,000 book value and the 20 percent noncontrolling interest was valued at $47,000. In each acquisition, the subsidiary?s excess acquisition-date fair over book value was assigned to a trade name with a 30-year life.

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

7-1 Connect: Module 7 Homework

	2012	2013	2014
Sales:
Aspen Company		$ 560,000	$	790,000	$	847,500
Birch Company		219,750		299,250		582,000
Cedar Company		Not available		188,500		290,800
Expenses:
Aspen Company		$ 525,000	$	470,000	$	657,500
Birch Company		162,000		239,000		502,500
Cedar Company		Not available		177,000		241,000
Dividends declared:
Aspen Company		$ 15,000	$	35,000	$	45,000
Birch Company		15,000		18,000		18,000
Cedar Company		Not available		3,000		8,000

7-1 Connect: Module 7 Homework

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, 2013, balance in Aspen's Investment in Birch Company account? Investment in Birch

7-1 Connect: Module 7 Homework

b. What is the consolidated net income for this business combination for 2014? Consolidated net income

7-1 Connect: Module 7 Homework7-1 Connect: Module 7 Homework

d.

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

7-1 Connect: Module 7 Homework

Date	Amount
12/31/12	$19,600
12/31/13	19,400
12/31/14	29,400

7-1 Connect: Module 7 Homework

What is the realized income of Birch in 2013 and 2014, respectively?

2013? and 2014?

c.	What is the net income attributable to the noncontrolling interest in 2014? Noncontrolling interest share of the consolidated net income

On January 1, 2012, Aspen Company acquired 80 percent of Birch Company's outstanding voting stock for $396,000. Birch reported a $420,000 book value and the fair value of the noncontrolling interest was $99,000 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $188,000 when Cedar had a $181,000 book value and the 20 percent noncontrolling interest was valued at $47,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year life. These companies report the following financial information. Investment income figures are not included. Sales: Aspen Company Birch Company Cedar Company Expenses: Aspen Company Birch Company Cedar Company Dividends declared: Aspen Company Birch Company Cedar Company 2012 2013 2014 $ 560,000 219,750 Not available $ 790,000 299,250 188,500 $ 847,500 582,000 290,800 $ 525,000 162,000 Not available $ 470,000 239,000 177,000 $ 657,500 502,500 241,000 $ 15,000 15,000 Not available $ 35,000 18,000 3,000 $ 45,000 18,000 8,000 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, 2013, balance in Aspen's Investment in Birch Company account? Investment in Birch $ 467,933 b. What is the consolidated net income for this business combination for 2014? Consolidated net income c. What is the net income attributable to the noncontrolling interest in 2014? Noncontrolling interests' share of the consolidated net income d. Assume that Birch made intra-entity inventory transfers to Aspen that have resulted in the following unrealized gross profits at the end of each year: Date 12/31/12 12/31/13 12/31/14 Amount $19,600 19,400 29,400 What is the realized income of Birch in 2013 and 2014, respectively? 2013 2014 Realized income eBook & esources Problem Difficulty: Medium Learning Objective: 07-01 Demonstrate the consolidation process when indirect control is present in a grandfatherfather-son ownership configuration