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

Multiple Choice

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2020, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2020, 2021, and 2022, respectively. Parker sold the land purchased from Stark for $92,000 in 2022. Both companies use the equity method of accounting.Which of the following will be included in a consolidation entry for 2020?

A) Debit Loss on Sale of Land for $5,000.
B) Credit Loss on Sale of Land for $5,000.
C) Debit Land for $5,000.
D) Debit Retained Earnings for $5,000.
E) Credit Gain on Sale of Land for $5,000.