Question
On January 1, 2012, Aspen Company acquired 80 percent of Birch Companys outstanding voting stock for $452,000. Birch reported a $505,000 book value and the
On January 1, 2012, Aspen Company acquired 80 percent of Birch Companys outstanding voting stock for $452,000. Birch reported a $505,000 book value and the fair value of the noncontrolling interest was $113,000 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $112,000 when Cedar had a $104,000 book value and the 20 percent noncontrolling interest was valued at $28,000. In each acquisition, the subsidiarys 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. |
2012 | 2013 | 2014 | ||||
Sales: | ||||||
Aspen Company | $ 517,500 | $ | 715,000 | $ | 935,000 | |
Birch Company | 294,500 | 368,000 | 594,600 | |||
Cedar Company | Not available | 247,100 | 223,400 | |||
Expenses: | ||||||
Aspen Company | $ 477,500 | $ | 495,000 | $ | 557,500 | |
Birch Company | 241,000 | 305,000 | 510,000 | |||
Cedar Company | Not available | 236,000 | 181,000 | |||
Dividends declared: | ||||||
Aspen Company | $ 18,000 | $ | 45,000 | $ | 55,000 | |
Birch Company | 10,000 | 18,000 | 18,000 | |||
Cedar Company | Not available | 2,000 | 6,000 | |||
|
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? |
b. | What is the consolidated net income for this business combination for 2014? |
c. | What is the net income attributable to the noncontrolling interest in 2014? |
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 | Amount |
12/31/12 | $19,700 |
12/31/13 | 20,300 |
12/31/14 | 25,600 |
|
What is the realized income of Birch in 2013 and 2014, respectively? |
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