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 reported on Starks books prior to consolidation from the intra-entity transfer of land in 2020.

Multiple Choice

• $5,000 gain.

• $80,000 gain.

• $5,000 loss.

• $85,000 loss.

• $80,000 loss.