Stiller company, an 80% owed 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.
On a consolidated worksheet, what adjustment would be made for 2012 regarding this land transfer?
A) debit gain for $50,000
B) credit gain for $50,000
C) debit land for $15,000
D) credit land for $15,000
E) credit gain for $15,000

Question

Stiller company, an 80% owed 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.
 On a consolidated worksheet, what adjustment would be made for 2012 regarding this land transfer? 
A) debit gain for $50,000
B) credit gain for $50,000
C) debit land for $15,000
D) credit land for $15,000
E)  credit gain for $15,000

damonte212 · Answer

b