A Subsidiary Sold Inventories to Its Parent for $40 000

Multiple Choice

A subsidiary sold inventories to its parent for $40 000. The inventories originally cost the subsidiary $32 000. At balance sheet date, the parent had 20% of the inventories still on hand. The consolidation adjustment entry (excluding tax effects) will eliminate unrealised profit amounting to:

A) $6400.
B) $1600.
C) $8000.
D) $9600.