Question

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.

In consolidation, the total amount of expenses related to Kailey, and to Denber's acquisition of Kailey, for 2014 is determined to be

$161,250.

$205,000.

$210,000.

$215,000.

Answer 1

$215,000

Step-by-step explanation:

The calculation of the total amount of expenses related to Kailey, and to Denber's acquisition of Kailey, for 2014 is given below:

= (Annual amount of amortization related to this acquisition × number of months) ÷ (Total number of months) + (expenses incurred × number of months) ÷ (Total number of months)

= ($15,000 × 4 months ÷ 12 months) + ($630,000 × 4 months ÷ 12 months)

= $5,000 + $210,000

= $215,000

We assume the books are closed on December 31.