Question

In: Accounting

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 to a trade name with a 30-year life.

  

     These companies report the following financial information. Investment income figures are not included.

  

2012

2013

2014

  Sales:

     Aspen Company

$ 602,500   

$

682,500   

$

787,500   

     Birch Company

297,500   

306,500   

454,400   

     Cedar Company

Not available   

254,600   

303,400   

  Expenses:

     Aspen Company

$ 417,500   

$

497,500   

$

670,000   

     Birch Company

240,000   

234,000   

372,500   

     Cedar Company

Not available   

241,000   

270,000   

  Dividends declared:

     Aspen Company

$ 15,000   

$

40,000   

$

50,000   

     Birch Company

10,000   

20,000   

20,000   

     Cedar Company

Not available   

2,000   

10,000   

  

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?

B

What is the consolidated net income for this business combination for 2014?

C

What is the net income attributable to the noncontrolling interest in 2014?

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

Amount

  12/31/12

$12,500   

  12/31/13

19,600   

  12/31/14

26,900   

  D

What is the realized income of Birch in 2013 and 2014, respectively?

Solutions

Expert Solution


Related Solutions

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, 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, 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, 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 $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, 2020, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing,...
On January 1, 2020, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,600,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $910,000, retained earnings of $460,000, and a noncontrolling interest fair value of $400,000. Corgan attributed the excess of fair value over Smashing's book value to various covenants with a 20-year remaining life. Corgan uses the equity method to account for its investment in Smashing....
On January 1, 2017, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing,...
On January 1, 2017, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,560,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $900,000, retained earnings of $450,000, and a noncontrolling interest fair value of $390,000. Corgan attributed the excess of fair value over Smashing's book value to various covenants with a 20-year remaining life. Corgan uses the equity method to account for its investment in Smashing....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT