On January 1, 2012, Aspen Company acquired 80 percent of Birch Company's outstanding voting stock for $438,000. Birch reported a $457,500 book value and the fair value of the noncontrolling interest was $109,500 on that date.
Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $200,000 when Cedar had a $205,000 book value and the 20 percent noncontrolling interest was valued at $50,000.
In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year life. These companies report the following financial information. Investment income figures are not included.
2012 2013 2014
Sales:
Aspen Company $ 632,500 $ 747,500 $ 822,500
Birch Company 261,250 327,250 416,900
Cedar Company Not available 185,900 292,600
Expenses:
Aspen Company $ 542,500 $ 522,500 $ 750,000
Birch Company 200,000 261,000 335,000
Cedar Company Not available 171,000 250,000
Dividends declared:
Aspen Company 15,000 $ 45,000 $ 55,000
Birch Company 8,000 15,000 15,000
Cedar Company Not available 2,000 6,000
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, 2013, balance in Aspen's Investment in Birch Company account? Investment in Birch __________
b. What is the consolidated net income for this business combination for 2014
Consolidated net income _______________
c. What is the net income attributable to the noncontrolling interest in 2014?
Noncontrolling interest share of the consolidated net income __________________
d. Assume that Birch made intra-entity inventory transfers to Aspen that have resulted in the following unrealized gross profits at the end of each year:
Date Amount
12/31/12 $16,600
12/31/13 23,600
12/31/14 33,200
What is the realized income of Birch in 2013 and 2014, respectively?
Realized income: 2013 ____________ 2014 _______________