On January 1, 2016, Lester Company Purchased 70% of Stork

question 5

Multiple Choice

On January 1, 2016, Lester Company purchased 70% of Stork Corporation's $5 par common stock for $600,000. The book value of Stork net assets was $640,000 at that time. The fair value of Stork's identifiable net assets were the same as their book value except for equipment that was $40,000 in excess of the book value. In the January 1, 2016, consolidated balance sheet, goodwill would be reported at:

• A) $152,000.
• B) $177,143.
• C) $80,000.
• D) $0.

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Definitions:

Variable Costing

A method of accounting that encompasses just the variable costs associated with manufacturing—such as direct materials, direct labor, and variable manufacturing overhead—as part of the product costs.

Unit Product Cost

An assessment of the total expense incurred to produce a single unit, incorporating direct costs like labor and materials, as well as indirect costs.

Year 1

A term typically used to refer to the first year of operation or the initial year in a specific timeframe.

Variable Costing

An accounting method that only considers variable costs (costs that change with production levels) when calculating the cost of goods sold.