On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstan
ID: 2469879 • Letter: O
Question
On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstanding voting stock for $468,000. Birch reported a $450,000 book value and the fair value of the noncontrolling interest was $117,000 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $208,000 when Cedar had a $188,000 book value and the 20 percent noncontrolling interest was valued at $52,000. 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.
What is the realized income of Birch in 2013 and 2014, respectively?
These companies report the following financial information. Investment income figures are not included.
Explanation / Answer
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? Year 2012 2012 Birch Company Sales during the year 235500 374000 Less: Expenses for the above year 186000 299000 Net income during the year 49500 75000 Aspen company Interest in the above incomes 80% 39600 60000 Aspen Company acquired the Birch Company stock on january 1, 2012 in Birch Company 468000 ADD: Controlling Interest share of Profit for both 2012 and 2013 99600 On December 31, 2013, balance in Aspen's Investment in Birch Company account 567600 b. What is the consolidated net income for this business combination for 2014? Aspen Birch Cedar Total Companies sales during the year 2014 820000 484400 264400 1568800 Les: All thress Companies Expenes during the year 2014 532500 410000 227000 1169500 Consolidated Net Income during the year 287500 74400 37400 399300 Non - Controlling interest ratio 100% 20% 20% Net Income attritibutable to Non-Controlling Ratio 287500 14880 7480 309860 d. What is the realized income of Birch in 2013 and 2014, respectively? Year 2013 2014 Sales during the year 374000 484400 Les: All thress Companies Expenes during the year 2014 299000 410000 Consolidated Net Income during the year 75000 74400 Less: Closing Inventory Transfer to Aspen for controllig ratio 80% 16960 23360 (21200*80%) (29200*80%) Add: Opening Inventory Transfer to Aspen for controllig ratio 80% 15920 16960 Realized income during the year 73960 68000
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