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

question 46

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 Stark's reported gain or loss relating to the land for 2022.

• A) $5,000 loss.
• B) $5,000 gain.
• C) $7,000 loss.
• D) $7,000 gain.
• E) $ 0.

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Definitions:

Poorest Fifth

The segment of a population that ranks at the bottom 20% in terms of income.

Richest Fifth

The segment of a population that represents the top 20% in terms of wealth or income distribution.

Nicholas Lemann

An American journalist and author recognized for his work on issues of racism, social inequality, and the history of American education.

Ghetto

Historically, a section of a city in which members of any minority group live because of social, legal, or economic pressure.