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

question 77

Multiple Choice

Pepe, Incorporated acquired 60% of Devin Company on January 1, 2012. 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 2012 and 2013, respectively. Pepe uses the equity method to account for its investment in Devin.
Compute the income from Devin reported on Pepe's books for 2013.

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

Recognize the role of patents in establishing and maintaining monopoly power.

Apply the marginal cost equals marginal revenue principle to advise monopolists on production decisions.

Analyze how monopolies compare with competitive industries in terms of output and pricing.

Understand the concept of marginal revenue and its implications for monopoly pricing and output decisions.

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Definitions:

Earnings Performance

An evaluation of a company's profitability over a specific period, often analyzed through metrics like EPS (earnings per share).

Accounting Period

A specific period of time used for accounting purposes, during which financial statements are prepared.

Income Statement

An Income Statement is a financial report that shows a company's revenues, expenses, and profits over a specific period, providing insight into its financial performance.

Net Income

The amount of profit left after all operating expenses, taxes, and interest payments are deducted from total revenue.