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

question 62

Multiple Choice

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Compute the gain or loss relating to the land that will be reported in consolidated net income for 2022.

• A) $5,000 loss.
• B) $7,000 gain.
• C) $12,000 gain.
• D) $7,000 loss.
• E) $12,000 loss.

---

Definitions:

Cognitive Boxes

Mental frameworks and categories that individuals use to organize and interpret information, influencing perceptions and decision-making.

Prejudices

Preconceived opinions that are not based on reason or actual experience, often leading to unfair treatment or discrimination.

Scapegoating

The practice of singling out any party for unmerited negative treatment or blame as a way of distracting attention from the real causes of a problem.

Discrimination

The unfair or prejudicial treatment of different categories of people, especially on the grounds of race, age, or sex.