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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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