Mortar Corporation Acquired 80 Percent of Granite Corporation's Voting Common

Mortar Corporation acquired 80 percent of Granite Corporation's voting common stock on January 1, 20X7. On January 1, 20X8, Mortar received $350,000 from Granite for equipment Mortar had purchased on January 1, 20X5, for $400,000. The equipment is expected to have a 10-year useful life and no salvage value. Both companies depreciate equipment on a straight-line basis.
Based on the preceding information, in the preparation of the 20X9 consolidated income statement, depreciation expense will be:

A) Debited for $40,000 in the eliminating entries.
B) Credited for $10,000 in the eliminating entries.
C) Debited for $10,000 in the eliminating entries.
D) Credited for $40,000 in the eliminating entries.