REFERENCE: Ref.05_10
Stark Company,a 90% owned subsidiary of Parker,Inc. ,sold land to Parker on May 1,2009,for $80,000.the land originally cost Stark $85,000.Stark reported net income of $200,000,$180,000,and $220,000 for 2009,2010,and 2011,respectively.Parker sold the land it purchased from Stark in 2009 for $92,000 in 2011.
-Compute the gain or loss on the intercompany sale of land.

Question

Quizplus · Accepted Answer

To calculate the gain or loss on the intercompany sale of land, we need to determine the carrying amount of the land to Stark, which is $85,000, and the selling price of the land to Parker, which is $80,000. Therefore, the loss on the sale for Stark is $5,000 ($85,000 - $80,000).

Since $80,000 was the price paid by Parker to Stark, there is no gain or loss on Parker's sale of the land, as the selling price of $92,000 is higher than the purchase price of $80,000.

REFERENCE: Ref.05_10 Stark Company,a 90% Owned Subsidiary of Parker,Inc. ,Sold Land to Land