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

question 20

Multiple Choice

Stiller Company, an 80% owned 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 consolidation worksheet, having used the equity method, what adjustment would be made for 2013 regarding the land transfer?

• A) Debit retained earnings for $15,000.
• B) Credit retained earnings for $15,000.
• C) Debit retained earnings for $50,000.
• D) Credit retained earnings for $50,000.
• E) Debit investment in Stiller for $15,000.

---

Definitions:

Social Purpose Venture

A business initiative aimed at achieving social goals alongside financial profitability.

Organic Valley

A cooperative of farmers producing organic food, known for its sustainable farming practices and organic dairy products.

Social Consequence Entrepreneurship

A for-profit venture whose primary market impact is social.

Sword & Plough

A social enterprise that repurposes military surplus material into durable and stylish bags and accessories, founded by two sisters.