Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land it purchased from Stark in 2010 for $92,000 in 2012.
-Compute the gain or loss on the intra-entity sale of land.
A) $80,000 gain.
B) $80,000 loss.
C) $5,000 gain.
D) $5,000 loss.
E) $85,000 loss.

Question

Quizplus · Accepted Answer

The intra-entity sale of land resulted in a $5,000 loss because Stark sold the land to Parker for $80,000, which was $5,000 less than its original cost of $85,000.

Stark Company, a 90% Owned Subsidiary of Parker, Inc