Question

"Pep, Incorporated acquired 60% of Devin Company on January 1, 2018. On that date, Devin sold equipment to Pep for $45,000. On the sale date, 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 for 2018. Pep uses the equity method to account for its investment in Devin. What is the amount of income from investment in Devin for 2018

Answer 1

The amount of income from investment in Devin for 2018 is $184,800

Step-by-step explanation:

According to the given data Net Income reported by Devin for 2018 is $300,000

To calculate the amount of income from investment in Devin for 2018 first we have to calculate the Total Income from Devin for 2018 as follows:

The Loss on Sale of Equipment= $120,000-$66,000-$45,000=$9,000

Difference in Dep=($54,000/9)-($45,000/9)=$1000

Therefore, Total Income from Devin for 2018=$300,000+$9,000-$1000

Total Income from Devin for 2018=$308,000

Therefore, Income from Devin reported on Pepe's books for 2018= $308,000*60%

Income from Devin reported on Pepe's books for 2018= $184,800