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.

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Definitions:

Repression

A defense mechanism whereby distressing thoughts, memories, or desires are kept out of conscious awareness.

Developmental Stage

A period in an individual's life characterized by specific milestones in physical, emotional, or cognitive development.

Fixation

In Freud’s theory, a failure to move forward from one stage to another as expected.

Regression

A reversion to immature patterns of behavior.