3. Pam Corporation owns 100 percent of Sun Corporation’s common stock. On January 2, 2016, Pam sold to Sun for

$40,000 machinery with a carrying amount of $30,000. Sun is depreciating the acquired machinery over a five-year life by the straight-line method. The net adjustments to compute 2016 and 2017 consolidated income before income tax would be an increase (decrease) of:

2016 2017 a $ (8,000) $2,000 b $ (8,000) $ 0 c $(10,000) $2,000 d $(10,000) $ 0