Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik

Exercise 38

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.