What amount should be reported as depreciation expense in Pirn’s 2011 consolidated income statement?

a. $50,000

b. $47,000

c. $44,000

d. $41,000 Items are based on the following:

Scroll, Inc., a wholly owned subsidiary of Pirn, Inc., began operations on January 1, 2011. The following information is from the condensed 2011 income statements of Pirn and Scroll:

Pirn Scroll Sales to Scroll $100,000 $ --

Sales to others 400,000 300,000 500,000 300,000 Cost of goods sold:

Acquired from Pirn -- 80,000 Acquired from others 350,000 190,000 Gross profit 150,000 30,000 Depreciation 40,000 10,000 Other expenses 60,000 15,000 Income from operations 50,000 5,000 Gain on sale of equipment to Scroll 12,000 --

Income before income taxes $ 62,000 $ 5,000 Additional information

• Sales by Pirn to Scroll are made on the same terms as those made to third parties.

• Equipment purchased by Scroll from Pirn for

$36,000 on January 1, 2011, is depreciated using the straight-line method over four years.