Pepe, Incorporated Acquired 60% of Devin Company on January 1

question 57

Multiple Choice

Pepe, Incorporated acquired 60% of Devin Company on January 1, 2020. On that date Devin sold equipment to Pepe for $45,000. The equipment had a cost of $120,000 and accumulated depreciation of $66,000 with a remaining life of 9 years. Devin reported net income of $300,000 and $325,000 for 2020 and 2021, respectively. Pepe uses the equity method to account for its investment in Devin.Assuming there are no excess amortizations or other intra-entity transactions, Compute the income from Devin reported on Pepe's books for 2021.

• A) $190,200.
• B) $196,000.
• C) $194,400.
• D) $187,000.
• E) $195,000.