Denber Co Acquired 60% of the Common Stock of Kailey Corp

question 34

Multiple Choice

Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2014. For 2014, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
What is the effect of including Kailey in consolidated net income for 2014?

• A) $31,000.
• B) $33,000.
• C) $55,000.
• D) $60,000.
• E) $39,000.

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Definitions:

Labor Rate Variance

The difference between the actual hourly labor rate and the standard rate, multiplied by the number of hours worked during the period.

Variable Overhead Rate Variance

The difference between the actual variable overhead cost incurred during a period and the standard cost that should have been incurred based on the actual activity of the period.

Materials Price Variance

The difference between a direct material’s actual price per unit and its standard price per unit, multiplied by the quantity purchased.

Standard Cost

An estimated or predetermined cost of performing an operation, producing a good, or delivering a service, used for budgeting and performance evaluation.