Pepe uses the equity method to account for its investment, Ask an Expert

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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 $300,0000 and $325,000 for 2009 and 2010, 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 2009?

a. $54,000 gain

b. $21,000 loss

c. $21,000 gain

d. $9,000 loss

e. $9,000 gain

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9436078

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