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 2012.
A) $110,000.
B) $100,000.
C) $125,000.
D) $85,000.
E) $88,000.

Question

Quizplus · Accepted Answer

Parent's Part of Net Income 2012 ($125,000 × .80) = $100,000

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