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

Exercise 4

King Corporation owns 80 percent of Lee Corporation's common stock.During October, Lee sold merchandise to King for $100,000.At December 31, 50 percent of this merchandise remains in King's inventory.Gross profit percentages were 30 percent for King and 40 percent for Lee.The amount of unrealized intra-entity profit in ending inventory at December 31 that should be eliminated in the consolidation process is
a. $40,000.
b. $20,000.
c. $16,000.
d. $15,000.
(AICPA adapted)