Pepe, Incorporated acquired 60% of Devin Company on January 1, 2010. On that dat

Question

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.

QUESTIONS:

(1) Compute the income from Devin reported on Pepe's books for 2010.

ANSWER: 184,800

(2) Compute the income from Devin reported on Pepe's books for 2011.

ANSWER: 194,400

(3) Compute the noncontrolling interest in the net income of Devin for 2010.

ANSWER: 123,200

PLEASE SHOW WORK HOW TO GET THESE ANSWERS. THESE ANSWERS ARE ALL CORRECT SO PLEASE DONT STATE OTHERWISE. THANK YOU.

Explanation / Answer

1.Net Income reported by Devin for 2010 300000 Add: Loss on Sale of Equipment(120000-66000-45000) 9000 Less: Difference in Dep.(54000/9)-(45000/9) 1000 Total Income from Devin for 2010 308000 Income from Devin reported on Pepe's books for 2010-308000*60% 184800 2.Net Income reported by Devin for 2011 325000 Less: Difference in Dep.(54000/9)-(45000/9) 1000 Total Income from Devin for 2011 324000 Income from Devin reported on Pepe's books for 2011-308000*60% 194400 (3) Noncontrolling interest in the net income of Devin for 2010. 308000-184800 Or 40%*308000= 123200 123200

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