Question

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. Compute income from Stiller on Leo's books for 2013. $100,000. $112,000. $140,000. $97,000. $125,000.

Answer 1

$112,000

Step-by-step explanation:

The computation of the income from Stiller on Leo's books for 2013 is shown below:

= Net income reported by Stiller × owned subsidiary percentage

= $140,000 × 80%

= $112,000

We simply multiply its income with the owned subsidiary percentage so that the correct amount can be computed.

All other information which is given is not relevant. Hence, ignored it