On January 1, 2019, Aspen Company acquired 80 percent of

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                                 $572,500                   $625,000                                $767,500

Birch Company                                255,750                        363,250                                    582,600

Cedar Company                               Not available                  231,900                                    267,000

Expenses:      

Aspen Company                              $390,000                        $607,500                                 $722,500

Birch Company                                193,000                           289,000                                   517,500

Cedar Company                              Not available                    217,000                                 233,000

Dividends declared:      

Aspen Company                                $20,000                         $35,000                                  $45,000 

Birch Company                                 5,000                              18,000                                     18,000

Cedar Company                               Not available               3,000                                         8,000

Assume that each of the following questions is independent:

  1. 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?

  2. What is the consolidated net income for this business combination for 2021?

  3. What is the net income attributable to the noncontrolling interest in 2021?

  4. 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:

  5. DateAmount
    12/31/19$19,800
    12/31/2016,100
    12/31/2132,300

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


Expert Answer



No answer yet for this question.