On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $480,000....
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $480,000. Birch reported a $495,000 book value and the fair value of the noncontrolling interest was $120,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $168,000 when Cedar had a $165,000 book value and the 20 percent noncontrolling interest was valued at $42,000. 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 | ||||
| Sales: | ||||||
| Aspen Company | $ | 472,500 | $ | 645,000 | $ | 850,000 |
| Birch Company | 262,250 | 337,500 | 607,300 | |||
| Cedar Company | Not available | 233,800 | 251,600 | |||
| Expenses: | ||||||
| Aspen Company | $ | 397,500 | $ | 642,500 | $ | 690,000 |
| Birch Company | 205,000 | 267,000 | 520,000 | |||
| Cedar Company | Not available | 219,000 | 219,000 | |||
| Dividends declared: | ||||||
| Aspen Company | $ | 20,000 | $ | 35,000 | $ | 45,000 |
| Birch Company | 15,000 | 15,000 | 15,000 | |||
| Cedar Company | Not available | 3,000 | 8,000 | |||
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 | $15,500 |
| 12/31/17 | 16,700 |
| 12/31/18 | 33,600 |
What is the accrual-based net income of Birch in 2017 and 2018, respectively?
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On January 1, 2016, Aspen Company acquired 80 percent of Birch
Company's voting stock for $480,000....
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $364,000....
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...
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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...
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