Question
On January 1, 2012, Aspen Company acquired 80 percent of Birch Companys outstanding voting stock for $468,000. Birch reported a $450,000 book value and the
On January 1, 2012, Aspen Company acquired 80 percent of Birch Companys outstanding voting stock for $468,000. Birch reported a $450,000 book value and the fair value of the noncontrolling interest was $117,000 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $208,000 when Cedar had a $188,000 book value and the 20 percent noncontrolling interest was valued at $52,000. 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 | $ 427,500 | $ | 780,000 | $ | 820,000 | |
Birch Company | 235,500 | 374,000 | 484,400 | |||
Cedar Company | Not available | 257,200 | 264,400 | |||
Expenses: | ||||||
Aspen Company | $ 340,000 | $ | 620,000 | $ | 532,500 | |
Birch Company | 186,000 | 299,000 | 410,000 | |||
Cedar Company | Not available | 238,000 | 227,000 | |||
Dividends declared: | ||||||
Aspen Company | $ 10,000 | $ | 35,000 | $ | 45,000 | |
Birch Company | 5,000 | 15,000 | 15,000 | |||
Cedar Company | Not available | 3,000 | 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 | ???? |
b. | What is the consolidated net income for this business combination for 2014? | ||||||||||||||||||||||||||
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started