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

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.