On January 1, 2019, Aspen Company acquired 80 percent of Birch Company's voting stock for $352,000. Birch reported a $380,000 book value, and the fair value of the noncontrolling interest was $88,000 on that date. Then, on January 1, 2020, Birch acquired 80 percent of Cedar Company for $128,000 when Cedar had a $106,000 book value and the 20 percent noncontrolling interest was valued at $32,000. 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. 2019 2020 2021 Sales: Aspen Company $ 512,500 $ 557,500 $ 827,500 Birch Company 239,000 360,750 523,200 Cedar Company Not available 235,200 310,200 Expenses: Aspen Company $ 400,000 $ 437,500 $ 522,500 Birch Company 177,000 286,000 435,000 Cedar Company Not available 216,000 267,000 Dividends declared: Aspen Company $ 18,000 $ 45,000 $ 55,000 Birch Company 8,000 20,000 20,000 Cedar Company Not available 2,000 6,000 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, 2020, balance in Aspen's Investment in Birch Company account? What is the consolidated net income for this business combination for 2021? What is the net income attributable to the noncontrolling interest in 2021?
On January 1, 2019, Aspen Company acquired 80 percent of Birch Company's voting stock for $352,000. Birch reported a $380,000 book value, and the fair value of the noncontrolling interest was $88,000 on that date. Then, on January 1, 2020, Birch acquired 80 percent of Cedar Company for $128,000 when Cedar had a $106,000 book value and the 20 percent noncontrolling interest was valued at $32,000. 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.
| 2019 | 2020 | 2021 | ||||
| Sales: | ||||||
| Aspen Company | $ | 512,500 | $ | 557,500 | $ | 827,500 |
| Birch Company | 239,000 | 360,750 | 523,200 | |||
| Cedar Company | Not available | 235,200 | 310,200 | |||
| Expenses: | ||||||
| Aspen Company | $ | 400,000 | $ | 437,500 | $ | 522,500 |
| Birch Company | 177,000 | 286,000 | 435,000 | |||
| Cedar Company | Not available | 216,000 | 267,000 | |||
| Dividends declared: | ||||||
| Aspen Company | $ | 18,000 | $ | 45,000 | $ | 55,000 |
| Birch Company | 8,000 | 20,000 | 20,000 | |||
| Cedar Company | Not available | 2,000 | 6,000 | |||
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, 2020, balance in Aspen's Investment in Birch Company account?
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What is the consolidated net income for this business combination for 2021?
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What is the net income attributable to the noncontrolling interest in 2021?
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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:
What is the accrual-based net income of Birch in 2020 and 2021, respectively?
a. If all companies use the equity method for internal reporting purposes, what is the December 31, 2020, balance in Aspen's Investment in Birch Company account?
b. What is the consolidated net income for this business combination for 2021?
c. What is the net income attributable to the noncontrolling interest in 2021?
| a | Investment in Birch at December 31, 2020 | |
| b. | Consolidated net income | |
| c. | Noncontrolling interests' share of the consolidated net income |
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 |
| 12/31/19 | $13,800 |
| 12/31/20 | 19,100 |
| 12/31/21 | 29,100 |
What is the accrual-based net income of Birch in 2020 and 2021, respectively?
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