On January 1, 2019, Aspen Company acquired 80 percent of Birch Company's voting stock for $392,000. Birch reported a $355,000 book value, and the fair value of the noncontrolling interest was $98,000 on that date. Then, on January 1, 2020, Birch acquired 80 percent of Cedar Company for $228,000 when Cedar had a $204,000 book value and the 20 percent noncontrolling interest was valued at $57,000. 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 $ 500,000 $ 750,000 $ 825,000 Birch Company 251,500 343,250 627,900 Cedar Company Not available 164,900 246,800 Expenses: Aspen Company $ 465,000 $ 567,500 $ 632,500 Birch Company 199,000 282,000 555,000 Cedar Company Not available 152,000 205,000 Dividends declared: Aspen Company $ 10,000 $ 30,000 $ 40,000 Birch Company 15,000 20,000 20,000 Cedar Company Not available 4,000 12,000 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? 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 $11,500 12/31/20 21,700 12/31/21 28,800 What is the accrual-based net income of Birch in 2020 and 2021, respectively?

Foundations of Business (MindTap Course List)

6th Edition

ISBN:9781337386920

Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Publisher:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Chapter15: Using Management And Accounting Information

Section15.8B: Financial Ratios

Problem 1CC

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Question

On January 1, 2019, Aspen Company acquired 80 percent of Birch Company's voting stock for $392,000. Birch reported a $355,000 book value, and the fair value of the noncontrolling interest was $98,000 on that date. Then, on January 1, 2020, Birch acquired 80 percent of Cedar Company for $228,000 when Cedar had a $204,000 book value and the 20 percent noncontrolling interest was valued at $57,000. 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	$	500,000	$	750,000	$	825,000
Birch Company		251,500		343,250		627,900
Cedar Company	Not available		164,900		246,800
Expenses:
Aspen Company	$	465,000	$	567,500	$	632,500
Birch Company		199,000		282,000		555,000
Cedar Company	Not available		152,000		205,000
Dividends declared:
Aspen Company	$	10,000	$	30,000	$	40,000
Birch Company		15,000		20,000		20,000
Cedar Company	Not available		4,000		12,000

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?
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	$11,500
12/31/20	21,700
12/31/21	28,800

What is the accrual-based net income of Birch in 2020 and 2021, respectively?

nces
Reg A to C
Req 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
12/31/20
12/31/21
$11,500
21,700
28,800
What is the accrual-based net income of Birch in 2020 and 2021, respectively?
Show less A
2020
2021
Accrual-based net income

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?
Show less A
Amount
a.
Investment in Birch at December 31, 2020
b.
Consolidated net income
С.
Noncontrolling interests' share of the consolidated net income
< Req A to C
Req
>

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