Reference no: EM132967437

Scroll Inc., a wholly-owned subsidiary of Pirn, Inc. began operations on January 1, 2019. The following information is from the condensed 2019 income statements of Pirn and Scroll:

                                                           Pirn                   Scroll

Sales                                  P 500,000         P 300,000

Cost of goods sold                (350,000)         (270,000)

Gross profit                          P 150,000           P 30,000

Depreciation                          ( 40,000)        ( 10,000)

Other expenses                     ( 60,000)          ( 15,000)

Income from operations            P 50,000 P             5,000

Gain on sale of equipment to Scroll __12,000 _________

Income before taxes                  P 62,000             P 5,000

Problem 1: Equipment purchased by Scroll from Pirn for P36,000 on January 1, 2019, is depreciated using the straight-line method over four years. What amount should be reported as depreciation expense in Pirn's consolidated income statements?