Advanced Accounting 12th Edition by Joe Ben Hoyle,Thomas Schaefer , Timothy Doupnik

Exercise 14

Panner, Inc., owns 30 percent of Watkins and applies the equity method. During the current year, Panner buys inventory costing $54,000 and then sells it to Watkins for $90,000. At the end of the year, Watkins still holds only $20,000 of merchandise. What amount of unrealized gross profit must Panner defer in reporting this investment using the equity method
a. $2,400.
b. $4,800.
c. $8,000.
d. $10,800.