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

question 55

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.
-Compute the income from Devin reported on Pepe's books for 2009.

• A)$174,600.
• B)$184,800.
• C)$172,000.
• D)$171,000.
• E)$180,600.

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Definitions:

First-In, First-Out Method

An inventory valuation method wherein the goods first added to the inventory are the first ones to be sold, ideal for products with shelf-life concerns.

Conversion Cost

The sum of direct labor and factory overhead costs, representing the expenses necessary to convert raw materials into finished goods.

Equivalent Units

A concept in costing used to convert partially completed goods into an equivalent number of fully completed units for inventory valuation.

First-In, First-Out Method

An inventory valuation method where the oldest inventory items are recorded as sold first, leaving the most recently purchased items in inventory.