Question
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $524,000. Birch reported a $520,000 book value and the fair
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $524,000. Birch reported a $520,000 book value and the fair value of the noncontrolling interest was $131,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $120,000 when Cedar had a $105,000 book value and the 20 percent noncontrolling interest was valued at $30,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life.
These companies report the following financial information. Investment income figures are not included.(see attachment)
Assume that each of the following questions is independent:
- If all companies use the equity method for internal reporting purposes, what is the December 31, 2017, balance in Aspen's Investment in Birch Company account?
- What is the consolidated net income for this business combination for 2018?
- What is the net income attributable to the noncontrolling interest in 2018?
- Assume that Birch made intra-entity inventory transfers to Aspen that have resulted in the following intra-entity gross profits in inventory at the end of each year:
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