4. Pam Company owns 100 percent of Sun Company. On January 1, 2016, Pam sold Sun delivery equipment at a gain. Pam had owned the equipment for two years and used a five-year straight-line depreciation rate with no residual value. Sun is using a three-year straight-line depreciation rate with no residual value for the equipment.

In the consolidated income statement, Sun’s recorded depreciation expense on the equipment for 2016 will be decreased by:

a 20% of the gain on sale b 33.33% of the gain on sale c 50% of the gain on sale d 100% of the gain on sale E 6-6 General problems