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

question 13

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.Which of the following will be included in a consolidation entry for 2020?

• A) Debit Loss on Sale of Land for $5,000.
• B) Credit Loss on Sale of Land for $5,000.
• C) Debit Land for $5,000.
• D) Debit Retained Earnings for $5,000.
• E) Credit Gain on Sale of Land for $5,000.

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Definitions:

Generalities

Statements or ideas that are broad and unspecific, lacking in detailed explanation or specificity.

Exaggerations

Statements that stretch the truth or overstate facts.

Truth in Lending Act

A federal law designed to promote informed use of consumer credit by requiring disclosures about terms and costs.

Cease-and-Desist Order

A legal injunction issued by a court or government agency ordering an individual or entity to stop an alleged illegal activity.