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 income from Stiller on Leo's books for 2013.
A) $140,000.
B) $97,000.
C) $125,000.
D) $100,000.
E) $112,000.

Question

Quizplus · Accepted Answer

Parent's Part of Net Income 2013 ($140,000 × .80) = $112,000

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