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 Parker's reported gain or loss relating to the land for 2012.
A) $12,000 gain.
B) $5,000 loss.
C) $12,000 loss.
D) $7,000 gain.
E) $7,000 loss.

Question

Quizplus · Accepted Answer

Parker sold the land for $92,000 in 2012, which it purchased for $80,000 from Stark. Therefore, the gain is $92,000 - $80,000 = $12,000.

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