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

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.
What is the consolidated gain or loss on equipment for 2012?

A) $0.
B) $9,000 gain.
C) $9,000 loss.
D) $21,000 gain.
E) $21,000 loss.