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.Compute the gain or loss relating to the land that will be reported in consolidated net income for 2022.

A) $5,000 loss.
B) $7,000 gain.
C) $12,000 gain.
D) $7,000 loss.
E) $12,000 loss.