On January 1, 2019, Aspen Company acquired 80 percent of Birch Company's voting stock for $428,000. Birchreported a $445,000 book value, and the fair value of the noncontrolling interest was $107,000 on that date. Then,on January 1, 2020, Birch acquired 80 percent of Cedar Company for $176,000 when Cedar had a $193,000 bookvalue and the 20 percent noncontrolling interest was valued at $44,000. In each acquisition, the subsidiary's excessacquisition-date fair over book value was assigned to a trade name with a 30-year remaining life.These companies report the following financial information. Investment income figures are not included.201920202021Sales:Aspen CompanyBirch CompanyCedar Company$ 572,500 $ 625,000 $ 767,500363,250231,900582,600267,000255,750Not availableExpenses:Aspen CompanyBirch Company$ 390,000 $ 607,500 $ 722,500289,000217,000193,000517,500233,000Cedar CompanyNot availableDividends declared:Aspen CompanyBirch CompanyCedar Company$ 20,000 $ 35,000 $ 45,00018,0003,0005,00018,000Not available8,000Assume 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, 2020, balancein 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-entitygross profits in inventory at the end of each year:DateAmount12/31/19 $19,80012/31/2012/31/2116,10032,300What is the accrual-based net income of Birch in 2020 and 2021, respectively?

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On January 1, 2019, Aspen Company acquired 80 percer reported a $445,000 book value, and the fair value of th on January 1, 2020, Birch acquired 80 percent of Cedar value and the 20 percent noncontrolling interest was val acquisition-date fair over book value was assigned to a t These companies report the following financial informati 2019 Sales:

On January 1, 2019, Aspen Company acquired 80 percer reported a $445,000 book value, and the fair value of th on January 1, 2020, Birch acquired 80 percent of Cedar value and the 20 percent noncontrolling interest was val acquisition-date fair over book value was assigned to a t These companies report the following financial informati 2019 Sales:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On January 1, 2019, 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, 2020, 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.
2019
2020
2021
Sales:
Aspen Company
Birch Company
Cedar Company
$ 572,500 $ 625,000 $ 767,500
363,250
231,900
582,600
267,000
255,750
Not available
Expenses:
Aspen Company
Birch Company
$ 390,000 $ 607,500 $ 722,500
289,000
217,000
193,000
517,500
233,000
Cedar Company
Not available
Dividends declared:
Aspen Company
Birch Company
Cedar Company
$ 20,000 $ 35,000 $ 45,000
18,000
3,000
5,000
18,000
Not available
8,000
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, 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:
Date
Amount
12/31/19 $19,800
12/31/20
12/31/21
16,100
32,300
What is the accrual-based net income of Birch in 2020 and 2021, respectively?

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