Strayer University, Virginia Beach
ACCOUNTING 401
Lab Assignment 6
Problem 7-14 (LO 7-1)
On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstanding voting stock
for $288,000. Birch reported a $300,000 book value and the fair value of the noncontrolling interest was
$72,000 on that date. Also, on January 1, 2013, Birch acquired 80 percen
...[Show More]
Lab Assignment 6
Problem 7-14 (LO 7-1)
On January 1, 2012, Aspen Company acquired 80 percent of Birch Company’s outstanding voting stock
for $288,000. Birch reported a $300,000 book value and the fair value of the noncontrolling interest was
$72,000 on that date. Also, on January 1, 2013, Birch acquired 80 percent of Cedar Company for
$104,000 when Cedar had a $100,000 book value and the 20 percent noncontrolling interest was valued
at $26,000. 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 $ 415,000 $ 545,000 $ 688,000
Birch Company 200,000 280,000 400,000
Cedar Company Not available 160,000 210,000
Expenses:
Aspen Company $ 310,000 $ 420,000 $ 510,000
Birch Company 160,000 220,000 335,000
Cedar Company Not available 150,000 180,000
Dividends declared:
Aspen Company $ 20,000 $ 40,000 $ 50,000
Birch Company 10,000 20,000 20,000
Cedar Company Not available 2,000 10,000
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, 2013, balance in Aspen's Investment in Birch Company account?
Investment
in Birch $346,560
b. What is the consolidated net income for this business combination for 2014?
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