interest was valued at $44,000. 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.
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $428,000. Birch reported a $445,000 book value and the fair value of the noncontrolling interest was $107,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $176,000 when Cedar had a $193,000 book value and the 20 percent noncontrolling interest was valued at $44,000. 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 | $ | 572,500 | $ | 625,000 | $ | 767,500 |
| Birch Company | 255,750 | 363,250 | 582,600 | |||
| Cedar Company | Not available | 231,900 | 267,000 | |||
| Expenses: | ||||||
| Aspen Company | $ | 390,000 | $ | 607,500 | $ | 722,500 |
| Birch Company | 193,000 | 289,000 | 517,500 | |||
| Cedar Company | Not available | 217,000 | 233,000 | |||
| Dividends declared: | ||||||
| Aspen Company | $ | 20,000 | $ | 35,000 | $ | 45,000 |
| Birch Company | 5,000 | 18,000 | 18,000 | |||
| Cedar Company | Not available | 3,000 | 8,000 | |||
Assume that each of the following questions is independent:
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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?
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What is the consolidated net income for this business combination for 2018?
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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 | $19,800 |
| 12/31/17 | 16,100 |
| 12/31/18 | 32,300 |
What is the accrual-based net income of Birch in 2017 and 2018, respectively?
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