Asked by
Ankita Yadav
on Dec 10, 2024
Verified
Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2020, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2020 and 2021, respectively. Leo uses the equity method to account for its investment.Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stiller on Leo's books for 2021.
A) $140,000.
B) $97,000.
C) $125,000.
D) $100,000.
E) $112,000.
Intra-Entity Transactions
Transactions that occur within the same legal entity, often between departments or divisions, which may require elimination during consolidation.
Net Income
The remaining profit for a company after deducting taxes and expenses from the revenue.
- Understand the principles and calculations involved in the equity method of accounting.
- Calculate the effects of intra-entity transactions on net income and retained earnings.
Verified Answer
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Learning Objectives
- Understand the principles and calculations involved in the equity method of accounting.
- Calculate the effects of intra-entity transactions on net income and retained earnings.
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