Reference no: EM132462683

On January 1, 2012, Aspen Company acquired 80 percent of Birch Company's outstanding voting stock for $372,000. Birch reported a $360,000 book value and the fair value of the noncontrolling interest was $93,000 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for $180,000 when Cedar had a $126,000 book value and the 20 percent noncontrolling interest was valued at $45,000. 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                       $ 517,500         $655,000                    $910,000

Birch Company                         272,000           344,250                      575,400

Cedar Company Not available       171,900           288,600

Expenses:

Aspen Company                              $ 425,000        $545,000                 $747,500

Birch Company                               231,000        266,000                    495,000

Cedar Company Not available            161,000         249,000

Dividends declared:

Aspen Company                                 $ 18,000        $35,000                  $45,000 

Birch Company                               5,000                15,000                    15,000                       

Cedar Company Not available             3,000                       8,000

Assume that each of the following questions is independent:

Question 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?

Question b. What is the consolidated net income for this business combination for 2014?

Question c. What is the net income attributable to the noncontrolling interest in 2014?

Question 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: DateAmount 12/31/12$14,300 12/31/1323,600 12/31/1432,000 What is the realized income of Birch in 2013 and 2014, respectively?