On January 1, 2022, Aspen Company acquired 80 percent of Birch Company's voting stock for $396,000. Birch reported a $420,000 book value, and the fair value of the noncontrolling interest was $99,000 on that date. Then, on January 1, 2023, Birch acquired 80 percent of Cedar Company for $188,000 when Cedar had a $181,000 book value and the 20 percent noncontrolling interest was valued at $47,000. 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. Items 2022 2023 2024 Sales: Aspen Company Birch Company $560,000 219,750 Expenses: Cedar Company Aspen Company Birch Company Cedar Company Dividends declared: Not available $790,000 299,250 188,500 $ 847,500 582,000 290,800 $525,000 162,000 $470,000 $ 657,500 Not available 239,000 177,000 502,500 241,000 Aspen Company Birch Company Cedar Company $ 15,000 15,000 Not available $35,000 $ 45,000 18,000 3,000 18,000 8,000 Assume that each of the following questions is independent: Required: a. If all companies use the equity method for internal reporting purposes, what is the December 31, 2023, balance in Aspen's Investment in Birch Company account? b. What is the consolidated net income for this business combination for 2024? c. What is the net income attributable to the noncontrolling interest in 2024? 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 12/31/22 12/31/23 12/31/24 Amount $ 19,600 19,400 29,400 What is the accrual-based net income of Birch in 2023 and 2024, respectively?
On January 1, 2022, Aspen Company acquired 80 percent of Birch Company's voting stock for $396,000. Birch reported a $420,000 book value, and the fair value of the noncontrolling interest was $99,000 on that date. Then, on January 1, 2023, Birch acquired 80 percent of Cedar Company for $188,000 when Cedar had a $181,000 book value and the 20 percent noncontrolling interest was valued at $47,000. 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. Items 2022 2023 2024 Sales: Aspen Company Birch Company $560,000 219,750 Expenses: Cedar Company Aspen Company Birch Company Cedar Company Dividends declared: Not available $790,000 299,250 188,500 $ 847,500 582,000 290,800 $525,000 162,000 $470,000 $ 657,500 Not available 239,000 177,000 502,500 241,000 Aspen Company Birch Company Cedar Company $ 15,000 15,000 Not available $35,000 $ 45,000 18,000 3,000 18,000 8,000 Assume that each of the following questions is independent: Required: a. If all companies use the equity method for internal reporting purposes, what is the December 31, 2023, balance in Aspen's Investment in Birch Company account? b. What is the consolidated net income for this business combination for 2024? c. What is the net income attributable to the noncontrolling interest in 2024? 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 12/31/22 12/31/23 12/31/24 Amount $ 19,600 19,400 29,400 What is the accrual-based net income of Birch in 2023 and 2024, respectively?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter12: Intangibles
Section: Chapter Questions
Problem 18E
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Transcribed Image Text:On January 1, 2022, Aspen Company acquired 80 percent of Birch Company's voting stock for $396,000. Birch reported a $420,000
book value, and the fair value of the noncontrolling interest was $99,000 on that date. Then, on January 1, 2023, Birch acquired 80
percent of Cedar Company for $188,000 when Cedar had a $181,000 book value and the 20 percent noncontrolling interest was valued
at $47,000. 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.
Items
2022
2023
2024
Sales:
Aspen Company
Birch Company
$560,000
219,750
Expenses:
Cedar Company
Aspen Company
Birch Company
Cedar Company
Dividends declared:
Not available
$790,000
299,250
188,500
$ 847,500
582,000
290,800
$525,000
162,000
$470,000
$ 657,500
Not available
239,000
177,000
502,500
241,000
Aspen Company
Birch Company
Cedar Company
$ 15,000
15,000
Not available
$35,000
$ 45,000
18,000
3,000
18,000
8,000
Assume that each of the following questions is independent:
Required:
a. If all companies use the equity method for internal reporting purposes, what is the December 31, 2023, balance in Aspen's
Investment in Birch Company account?
b. What is the consolidated net income for this business combination for 2024?
c. What is the net income attributable to the noncontrolling interest in 2024?
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
12/31/22
12/31/23
12/31/24
Amount
$ 19,600
19,400
29,400
What is the accrual-based net income of Birch in 2023 and 2024, respectively?
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