On January 1, 2012, Aspen Company acquired 80 percent of Birch Company's outstanding voting stock for $396,000
$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.
Cedar Company 2012 2013 2014 $ 560,000
Not available $ 790,000
188,500 $ 847,500
290,800 $ 525,000
Not available $ 470,000
177,000 $ 657,500
241,000 $ 15,000
Not available $ 35,000
3,000 $ 45,000
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:
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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