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ibidnnudny2584
22.08.2020 •
Business
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $364,000. Birch reported a $320,000 book value and the fair value of the noncontrolling interest was $91,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $108,000 when Cedar had a $108,000 book value and the 20 percent noncontrolling interest was valued at $27,000. 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. 2016 2017 2018 $ 485,000 $ 767,500 211,500 386,000 Not available 263,700 $ 892,500 622,300 240,000 Sales: Aspen Company Birch Company Cedar Company Expenses : Aspen Company Birch Company Cedar Company Dividends declared: Aspen Company Birch Company Cedar Company $ 332,500 167,000 Not available $ 525,000 $ 635,000 315,000 550,000 244,000 210,000 $ 10,000 $ 45,000 $ 55,000 8,000 18,000 18,000 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, 2017, balance in Aspen's Investment in Birch Company account?
b. What is the consolidated net income for this business combination for 2018?
c. What is the net income attributable to the noncontrolling interest in 2018?
d. 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:
Date Amount
12/31/16 $13,500
12/31/17 16,200
12/31/18 30,400
What is the accrual-based net income of Birch in 2017 and 2018, respectively? Complete this question by entering your answers in the tabs below. Req A to C Req D
a. If all companies use the equity method for internal reporting purposes, what is the December 31, 2017, balance in Aspen's Investment in Birch Company account?
b. What is the consolidated net income for this business combination for 2018?
c. What is the net income attributable to the noncontrolling interest in 2018?
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a. Investment in Birch
b. Consolidated net income
c. Noncontrolling interests' share of the consolidated net income
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Ответ:
A.$440,432
B.$354,400
C.$24,036
D.2017 Realized income - Birch$78,840
2018 Realized income- Birch$76,880
Explanation:
a) Calculation for December 31, 2017, balance in Aspen's Investment in Birch Company account
Consideration transferred by Aspen$364,000
Add Noncontrolling interest fair value$91,000
Birch’s business fair value$455,000
Less :Book value($320,000)
Trade name$135,000
Life30years
Annual amortization $4,500
($135,000/30)
Consideration transferred for Cedar by Birch$108,000
Add Noncontrolling interest fair value$27,000
Cedar’s business fair value$135,000
Less Book value($108,000)
Excess to trade name$27,000
Life30years
Annual amortization $900
(27,000/30)
Investment in Birch $364,000
Birch's reported income-2016 $44,500
($211,500 - $167,000)
Less Amortization expense$4,500
Accrual-based income $40,000
Aspen’s percentage ownership80%
Equity accrual-2016 $32,000
(80%×$40,000)
Dividends received 2016 ($6,400)
($32,000-$40,000)
(-$8,000 x 80%)
Birch's reported income-2017 $71,000
($386,000 - $315,000)
Amortization expense-$4,500
Income from Cedar $15,040
[80% x (263,700 -244,000 - 900]
Accrual-based income$81,540
($71,000+$15,040-$4,500)
Aspen’s percentage ownership80%
Equity accrual-2013 $65,232
(80%×$81,540)
Dividends received from Birch 2017 ($14,400)
($18,000 x 80%)
Investment in Birch Dec 31,2017 $440,432
($364,000+$32,000+$65,232-$6,400-$14,400)
b) Calculation for the consolidated net income for this business combination for 2018
Consolidated $1,754,800
LessConsolidated expenses ($1,395,000)
Less Total amortization expense ( a)($5,400)
Consolidated net income for 2018$354,400
c) Calculation for the net income attributable to the noncontrolling interest in 2018
Cedar’s NCI in consolidated net income
Revenues less expenses $30,000
($240,000 - $210,000)
Less Excess amortization ($900)
Accrual-based income$29,100
Noncontrolling interest percentage20%
Cedar’s NCI in consolidated net income$5,820
(20%×$29,100)
Birch's NCI in consolidated Net income
Revenues less expenses $72,300
($622,300 - $550,000)
Less Excess amortization($4,500)
Equity in Cedar income $23,280
[(30,000 – 900) × 80%]
Realized2014 income of Birch$91,080
($72,300+$23,280)
Noncontrolling interest percentage20%
Birch’s NCI in consolidated net income $18,216(80%×$91,080)
Total NCIshare of 2018 consolidated net income $24,036
($18,216+$5,820)
d) Calculation for the accrual-based net income of Birch in 2017 and 2018, respectively
2017 Realized income of Birch
prior to accounting for unrealized gross profit(a)$81,540
2016 Transfer-gross profit recognized in 2017$13,500
Less 2017 Transfer-gross profit to be recognized in 2018($16,200)
2017 Realized income - Birch$78,840
2018 Realized income of Birch prior to accounting for unrealized gross profit(c)$91,080
2017 Transfer-gross profit recognized in 201816200
Less 2018 Transfer-gross profit to be recognized in 2019($30,400)
2018 Realized income-Birch$76,880
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