Question
On January 1, 2012, Aspen Company acquired 80 percent of Birch Companys outstanding voting stock for $438,000. Birch reported a $457,500 book value and the
On January 1, 2012, Aspen Company acquired 80 percent of Birch Companys outstanding voting stock for $438,000. Birch reported a $457,500 book value and the fair value of the noncontrolling interest was $109,500 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $200,000 when Cedar had a $205,000 book value and the 20 percent noncontrolling interest was valued at $50,000. 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 | $ 632,500 | $ | 747,500 | $ | 822,500 | |
Birch Company | 261,250 | 327,250 | 416,900 | |||
Cedar Company | Not available | 185,900 | 292,600 | |||
Expenses: | ||||||
Aspen Company | $ 542,500 | $ | 522,500 | $ | 750,000 | |
Birch Company | 200,000 | 261,000 | 335,000 | |||
Cedar Company | Not available | 171,000 | 250,000 | |||
Dividends declared: | ||||||
Aspen Company | $ 15,000 | $ | 45,000 | $ | 55,000 | |
Birch Company | 8,000 | 15,000 | 15,000 | |||
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 | $16,600 |
12/31/13 | 23,600 |
12/31/14 | 33,200 |
|
What is the realized income of Birch in 2013 and 2014, respectively? |
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