Stiller Company, an 80% Owned Subsidiary of Leo Company, Purchased

question 49

Multiple Choice

Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stiller on Leo's books for 2021.

• A) $140,000.
• B) $97,000.
• C) $125,000.
• D) $100,000.
• E) $112,000.

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Definitions:

Price Discrimination

A pricing approach in which the same provider sells the same or nearly the same products or services for different prices in distinct markets or to various customers.

Elasticities of Demand

A measure of how much the quantity demanded of a good responds to a change in price, indicating the sensitivity of consumers to price changes.

Economic Incentive

A financial or material benefit that motivates individuals or businesses to act in certain ways or pursue particular courses of action.