Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2012, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2012 and 2013, respectively. Leo uses the equity method to account for its investment.
Compute the gain or loss on the intra-entity sale of land.
A) $15,000 loss.
B) $15,000 gain.
C) $50,000 loss.
D) $50,000 gain.
E) $65,000 gain.

Question

Quizplus · Accepted Answer

Sub's Land Transfer Value $75,000 - Sub's Land BV $60,000 = $15,000 Gain on Intra-Entity Sale of Land

Stiller Company, an 80% Owned Subsidiary of Leo Company, Purchased