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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

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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.7-1 Connect: Module 7 Homework   201220132014  Sales:           Aspen Company $ 560,000   $790,000   $847,500        Birch Company 219,750    299,250    582,000        Cedar Company Not available    188,500    290,800     Expenses:           Aspen Company $ 525,000   $470,000   $657,500        Birch Company 162,000    239,000    502,500        Cedar Company Not available    177,000    241,000     Dividends declared:           Aspen Company $  15,000   $35,000   $45,000        Birch Company 15,000    18,000    18,000        Cedar Company Not available    3,000    8,000   
7-1 Connect: Module 7 HomeworkAssume 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





7-1 Connect: Module 7 Homeworkb. What is the consolidated net income for this business combination for 2014? Consolidated net income
7-1 Connect: Module 7 Homework7-1 Connect: Module 7 Homeworkd.Assume that Birch made intra-entity inventory transfers to Aspen that have resulted in the following unrealized gross profits at the end of each year7-1 Connect: Module 7 HomeworkDateAmount  12/31/12$19,600     12/31/1319,400     12/31/1429,400  7-1 Connect: Module 7 HomeworkWhat is the realized income of Birch in 2013 and 2014, respectively?2013? and 2014?c.What is the net income attributable to the noncontrolling interest in 2014?Noncontrolling interest share of the consolidated net income

 
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