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

question 52

Multiple Choice

Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. 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 2010 and 2011, respectively. Pepe uses the equity method to account for its investment in Devin. Compute the income from Devin reported on Pepe's books for 2010.

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

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Definitions:

Focal Point

Point at which light rays cross after passing through a concave lens, such as the lens of the eye.

Concave Lens

A lens that is thinner at the center than at the edges, commonly used to correct nearsightedness.

Far Point

The maximum distance at which the eye can see an object clearly without strain.

Near Point

The closest distance at which an object can be seen distinctly by the eye without blurring.