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

question 29

Multiple Choice

Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2010, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2010 and 2011, respectively. Leo uses the equity method to account for its investment. Compute income from Stiller on Leo's books for 2011.

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

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Definitions:

Canadian Common Stocks

Equity in publicly listed Canadian corporations, indicative of part ownership in these enterprises.

Risk Premium

The extra yield an investor anticipates earning for accepting greater risk relative to a risk-free investment.

Long-term Government Bonds

Debt securities issued by a government with a maturity date typically beyond ten years, offering a form of long-term investment.

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The time at which a financial instrument, such as a bond or loan, becomes due and must be repaid.