On January 1, 2019, Aspen Company acquired 80 percent of Birch Company's voting stock for $500,000. Birch reported a $490,000 book value, and the fair value of the noncontrolling interest was $125,000 on that date. Then, on January 1, 2020, Birch acquired 80 percent of Cedar Company for $224,000 when Cedar had a $253,000 book value and the 20 percent noncontrolling interest was valued at $56,000. 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. Sales: Aspen Company Birch Company Cedar Company Expenses: Aspen Company Birch Company Cedar Company Dividends declared: Aspen Company Birch Company Cedar Company 2019 2020 $ 637,500 $ 650,000 269,500 356,750 193,300 Not available $ 402,500 $ 645,000 215,000 286,000 Not available 182,000 2021 Assume that each of the following questions is independent: $732,500 588,300 295, 200 $577,500 510,000 260,000 $ 20,000 $ 35,000 $ 45,000 5,000 20,000 3,000 20,000 8,000 Not available 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? d. 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:
On January 1, 2019, Aspen Company acquired 80 percent of Birch Company's voting stock for $500,000. Birch reported a $490,000 book value, and the fair value of the noncontrolling interest was $125,000 on that date. Then, on January 1, 2020, Birch acquired 80 percent of Cedar Company for $224,000 when Cedar had a $253,000 book value and the 20 percent noncontrolling interest was valued at $56,000. 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. Sales: Aspen Company Birch Company Cedar Company Expenses: Aspen Company Birch Company Cedar Company Dividends declared: Aspen Company Birch Company Cedar Company 2019 2020 $ 637,500 $ 650,000 269,500 356,750 193,300 Not available $ 402,500 $ 645,000 215,000 286,000 Not available 182,000 2021 Assume that each of the following questions is independent: $732,500 588,300 295, 200 $577,500 510,000 260,000 $ 20,000 $ 35,000 $ 45,000 5,000 20,000 3,000 20,000 8,000 Not available 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? d. 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:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Date
Amount
12/31/19 $13,000
23,300
30, 200
12/31/20
12/31/21
What is the accrual-based net income of Birch in 2020 and 2021, respectively?
Complete this question by entering your answers in the tabs below.
Req A to C
Req D
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?
Investment in Birch at December 31, 2020
a.
b. Consolidated net income
c. Noncontrolling interests' share of the consolidated net income
Amount
Show less A
Transcribed Image Text:On January 1, 2019, Aspen Company acquired 80 percent of Birch Company's voting stock for $500,000. Birch reported a $490,000
book value, and the fair value of the noncontrolling interest was $125,000 on that date. Then, on January 1, 2020, Birch acquired 80
percent of Cedar Company for $224,000 when Cedar had a $253,000 book value and the 20 percent noncontrolling interest was
valued at $56,000. 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.
Sales:
Aspen Company
Birch Company
Cedar Company
Expenses:
Aspen Company
Birch Company
Cedar Company
Dividends declared:
Aspen Company
Birch Company
Cedar Company
2021
$ 637,500 $ 650,000 $ 732,500
269,500
356,750
588,300
Not available. 193,300
295, 200
2019
$ 402, 500
215,000
Not available.
$ 20,000 $
5,000
Not available
2020
$ 645,000 $ 577,500
286,000
182,000
510,000
260,000
35,000 $
20,000
3,000
Assume that each of the following questions is independent:
45,000
20,000
8,000
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?
d. 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:
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