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.
On a consolidation worksheet, what adjustment would be made for 2012 regarding the land transfer?
A) Debit gain for $50,000.
B) Credit gain for $50,000.
C) Debit land for $15,000.
D) Credit land for $15,000.
E) Credit gain for $15,000.

Question

Quizplus · Accepted Answer

Credit the Land account for the Gain of $15,000, with any realized gain on the transfer deferred until the parcel is sold outside the entity in the future

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