Petunia Company Owns 100% of Sage Corporation

Multiple Choice

Petunia Company owns 100% of Sage Corporation. On January 1, 2017 Petunia sold equipment to Sage at a gain. Petunia had owned the equipment for four years and used a ten-year straight-line rate with no residual value. Sage is using an eight-year straight-line rate with no residual value. In the consolidated income statement, Sage's recorded depreciation expense on the equipment for 2017 will be reduced by:

A) 10% of the gain on sale.
B) 12 1/2% of the gain on sale.
C) 80% of the gain on sale.
D) 100% of the gain on sale.