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.
Correct Answer:
Verified
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