On January 1, 2012, Aspen Company acquired 80 percent of Birch Company's outstanding voting stock for $396,000

On January 1, 2012, Aspen Company acquired 80 percent of Birch Company's outstanding voting stock for $396,000

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On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstanding voting stock for
$396,000. Birch reported a $420,000 book value and the fair value of the noncontrolling interest was
$99,000 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $188,000
when Cedar had a $181,000 book value and the 20 percent noncontrolling interest was valued at $47,000.
In each acquisition, the subsidiary’s 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.
Sales:
Aspen Company
Birch Company
Cedar Company
Expenses:
Aspen Company
Birch Company
Cedar Company
Dividends declared:
Aspen Company
Birch Company
Cedar Company 2012 2013 2014 $ 560,000
219,750
Not available $ 790,000
299,250
188,500 $ 847,500
582,000
290,800 $ 525,000
162,000
Not available $ 470,000
239,000
177,000 $ 657,500
502,500
241,000 $ 15,000
15,000
Not available $ 35,000
18,000
3,000 $ 45,000
18,000
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 $ 467,933 b. What is the consolidated net income for this business combination for 2014?
Consolidated net income c. What is the net income attributable to the noncontrolling interest in 2014?
Noncontrolling interests' share of the consolidated net income 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
12/31/12
12/31/13
12/31/14 Amount
$19,600
19,400
29,400 What is the realized income of Birch in 2013 and 2014, respectively?
2013 2014 Realized income eBook & esources Problem Difficulty: Medium Learning Objective: 07-01 Demonstrate the consolidation
process when indirect control is present in a grandfatherfather-son ownership configuration.

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