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

question 54

Multiple Choice

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land it purchased from Stark in 2010 for $92,000 in 2012.
-Compute Stark's reported gain or loss relating to the land for 2012.

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

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Definitions:

Risk Premiums

Additional returns demanded by investors for taking on higher risk, varying according to the perceived risk of the investment.

Probability Distribution

A function in statistics that enumerates all conceivable values and their associated probabilities for a random variable within a predetermined range.

Variance

A measure of the dispersion or spread of a set of values, indicating how much the numbers in the set differ from the mean.

Diversifiable Risk

A risk that can be reduced or eliminated from a portfolio through diversification, not linked to the market's movements as a whole.