Question
In: Operations Management
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $332,000....
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $332,000. Birch reported a $370,000 book value and the fair value of the noncontrolling interest was $83,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $184,000 when Cedar had a $197,000 book value and the 20 percent noncontrolling interest was valued at $46,000. 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.
| 2016 | 2017 | 2018 | ||||
| Sales: | ||||||
| Aspen Company | $ | 585,000 | $ | 585,000 | $ | 885,000 |
| Birch Company | 246,250 | 315,500 | 454,500 | |||
| Cedar Company | Not available | 221,200 | 238,800 | |||
| Expenses: | ||||||
| Aspen Company | $ | 530,000 | $ | 420,000 | $ | 642,500 |
| Birch Company | 189,000 | 247,000 | 375,000 | |||
| Cedar Company | Not available | 202,000 | 204,000 | |||
| Dividends declared: | ||||||
| Aspen Company | $ | 15,000 | $ | 30,000 | $ | 40,000 |
| Birch Company | 8,000 | 15,000 | 15,000 | |||
| Cedar Company | Not available | 4,000 | 12,000 | |||
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:
| Date | Amount |
| 12/31/16 | $15,000 |
| 12/31/17 | 19,000 |
| 12/31/18 | 34,400 |
What is the accrual-based net income of Birch in 2017 and 2018, respectively?
a. 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?
b. What is the consolidated net income for this business
combination for 2018?
c. What is the net income attributable to the noncontrolling
interest in 2018?
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|
|||||||||||||
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:
| Date | Amount |
| 12/31/16 | $15,000 |
| 12/31/17 | 19,000 |
| 12/31/18 | 34,400 |
What is the accrual-based net income of Birch in 2017 and 2018, respectively?
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|
Solutions
keosha answered 5 months agoRelated Solutions
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $424,000....
On January 1, 2016,
Aspen Company acquired 80 percent of Birch Company's voting stock
for $424,000. Birch reported a $425,000 book value and the fair
value of the noncontrolling interest was $106,000 on that date.
Then, on January 1, 2017, Birch acquired 80 percent of Cedar
Company for $232,000 when Cedar had a $218,000 book value and the
20 percent noncontrolling interest was valued at $58,000. In each
acquisition, the subsidiary's excess acquisition-date fair over
book value was assigned to...
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $460,000....
On January 1, 2016, Aspen Company acquired 80 percent of Birch
Company's voting stock for $460,000. Birch reported a $470,000 book
value and the fair value of the noncontrolling interest was
$115,000 on that date. Then, on January 1, 2017, Birch acquired 80
percent of Cedar Company for $164,000 when Cedar had a $124,000
book value and the 20 percent noncontrolling interest was valued at
$41,000. In each acquisition, the subsidiary's excess
acquisition-date fair over book value was assigned to...
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $504,000....
On January 1, 2016, Aspen Company acquired 80 percent of Birch
Company's voting stock for $504,000. Birch reported a $510,000 book
value and the fair value of the noncontrolling interest was
$126,000 on that date. Then, on January 1, 2017, Birch acquired 80
percent of Cedar Company for $160,000 when Cedar had a $164,000
book value and the 20 percent noncontrolling interest was valued at
$40,000. In each acquisition, the subsidiary's excess
acquisition-date fair over book value was assigned to...
On January 1, 2019, Aspen Company acquired 80 percent of Birch Company's voting stock for $482,000....
On January 1, 2019, Aspen Company acquired 80 percent of Birch
Company's voting stock for $482,000. Birch reported a $542,500 book
value, and the fair value of the noncontrolling interest was
$120,500 on that date. Then, on January 1, 2020, Birch acquired 80
percent of Cedar Company for $144,000 when Cedar had a $150,000
book value and the 20 percent noncontrolling interest was valued at
$36,000. In each acquisition, the subsidiary's excess
acquisition-date fair over book value was assigned to...
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company’s voting stock for $288,000....
On January 1, 2016,
Aspen Company acquired 80 percent of Birch Company’s voting stock
for $288,000. Birch reported a $300,000 book value, and the fair
value of the noncontrolling interest was $72,000 on that date.
Then, on January 1, 2017, Birch acquired 80 percent of Cedar
Company for $104,000 when Cedar had a $100,000 book value and the
20 percent noncontrolling interest was valued at $26,000. In each
acquisition, the subsidiary’s excess acquisition-date fair over
book value was assigned to...
On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstanding voting stock for...
On January 1, 2012, Aspen Company acquired 80 percent of Birch
Company’s outstanding voting stock for $490,000. Birch reported a
$477,500 book value and the fair value of the noncontrolling
interest was $122,500 on that date. Also, on January 1, 2013, Birch
acquired 80 percent of Cedar Company for $192,000 when Cedar had a
$141,000 book value and the 20 percent noncontrolling interest was
valued at $48,000. In each acquisition, the subsidiary’s excess
acquisition-date fair over book value was assigned...
On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstanding voting stock for...
On January 1, 2012, Aspen Company acquired 80 percent of Birch
Company’s outstanding voting stock for $504,000. Birch reported a
$510,000 book value and the fair value of the noncontrolling
interest was $126,000 on that date. Also, on January 1, 2013, Birch
acquired 80 percent of Cedar Company for $160,000 when Cedar had a
$164,000 book value and the 20 percent noncontrolling interest was
valued at $40,000. In each acquisition, the subsidiary’s excess
acquisition-date fair over book value was assigned...
On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstanding voting stock for...
On January 1, 2012, Aspen Company acquired 80 percent of Birch
Company’s outstanding voting stock for $504,000. Birch reported a
$510,000 book value and the fair value of the noncontrolling
interest was $126,000 on that date. Also, on January 1, 2013, Birch
acquired 80 percent of Cedar Company for $160,000 when Cedar had a
$164,000 book value and the 20 percent noncontrolling interest was
valued at $40,000. In each acquisition, the subsidiary’s excess
acquisition-date fair over book value was assigned...
On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstanding voting stock for...
On January 1, 2012, Aspen Company acquired 80 percent of Birch
Company’s outstanding voting stock for $452,000. Birch reported a
$505,000 book value and the fair value of the noncontrolling
interest was $113,000 on that date. Also, on January 1, 2013, Birch
acquired 80 percent of Cedar Company for $112,000 when Cedar had a
$104,000 book value and the 20 percent noncontrolling interest was
valued at $28,000. In each acquisition, the subsidiary’s excess
acquisition-date fair over book value was assigned...
On January 1, 20X8 , Bond Corporation acquired 80 percent of Gale Company's voting stock. On...
On January 1, 20X8 , Bond Corporation acquired 80 percent of
Gale Company's voting stock. On the date of acquisition, the book
value and fair value of Gale's net assets were equal. Bond uses the
equity method of accounting for its ownership of Gale, and includes
the amount of accumulated depreciation prior to acquisition in its
elimination entries on the consolidation worksheet.
On December 31, 20X8, the trial balances of the two companies
are as follows :
Item
Debit
Credit...
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