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

question 75

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.
-What is the gain or loss on equipment reported by Devin for 2010?

• A) $54,000 gain.
• B) $21,000 loss.
• C) $21,000 gain.
• D) $9,000 loss.
• E) $9,000 gain.

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Definitions:

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