On January,1, 2012, Aspen company acquired 80 percent of Birch Company's outstanding voting stock for $352,000. Birch reported a $380,000 book value and fair value of the noncontrolling interest was $88,000 on that date. Also, on January 1, 2013, Birch acquired 80 percent of the Cedar Company for $128,000 when Cedar had a $106,000 book value and the 20 percent noncontrolling interest was valued at $32,000. In each acquisition, the subsidiary's excess acquisition-date fair value was assigned to a trade name witha 30-year life.
These compannies report the following financial information. Investment income figures are not included.
2012 2013 2014
Sales:
Aspen Company $ 512,000 $ 557,500 $ 827,500
Birch Company 239,000 360,750 523,200
Cedar Company Not available 235,200 310,200
Expenses:
Aspen Company $ 400,000 $437,500 522,500
Birch Company 177,000 286,000 435,000
Cedar Company Not avaliable 216,000 267,000
Dividends declared:
Aspen company $ 18,000 45,000 55,000
Birch Company 8,000 20,000 20,000
Cedar Company Not available 2,000 6,000
Assume that each of the following questions is independent:
a. If all compannies 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's 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 the year:
Date Amount
12/31/12 $ 13,800
12/31/13 19,100
12/31/14 29,100
What is the realized income of Birch in 2013 and 2014, respectively?
2013 2014
Realized income