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

question 97

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 2011.

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

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