REFERENCE: Ref.05_11 Pepe,Incorporated Acquired 60% of Devin Company on January 1,2009.On That

question 70

Multiple Choice

REFERENCE: Ref.05_11
Pepe,Incorporated acquired 60% of Devin Company on January 1,2009.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 2009 and 2010,respectively.Pepe uses the equity method to account for its investment in Devin.
-What is the consolidated gain or loss on equipment for 2009?

• A)$0.
• B)$9,000 gain.
• C)$9,000 loss.
• D)$21,000 gain.
• E)$21,000 loss.

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Definitions:

Hard Bargaining

A negotiation strategy involving firm stands on demands and little willingness to compromise.

Reciprocity

A principle of mutual exchange in social relations where benefits or services are returned in kind.

Consuming Goods

The act of using up or buying products and services to fulfill human needs or desires.

Distribution

The process by which goods, resources, or information are spread or disseminated across different locations or groups.