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

question 56

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.
-On a consolidation worksheet, having used the equity method, what adjustment would be made for 2011 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:

Data Flow

The movement of data among devices, systems, or software, often visualized within a process or architecture to analyze the transfer and processing of data.

Executive Support Systems

A type of management information system designed to help and support senior executives in decision-making by providing relevant, concise, and accurate information.

"If-Then" Rules

Statements in programming and logic that define a condition (IF) and the outcome (THEN) that follows if the condition is met.

Management Information System

A system designed to manage and process an organization's information and support its decision-making processes.