Pluto Company Owns 100 Percent of the Capital Stock of Both

Multiple Choice

Pluto Company owns 100 percent of the capital stock of both Saturn Corporation and Sol Corporation.Saturn purchases merchandise inventory from Sol at 125 percent of Sol's cost.During 20X8,Sol sold inventory to Saturn that it had purchased for $25,000.Saturn sold all of this merchandise to unrelated customers for $56,892 during 20X8.In preparing combined financial statements for 20X8,Pluto's bookkeeper disregarded the common ownership of Saturn and Sol.
-Based on the information given above,by what amount was unadjusted revenue overstated in the combined income statement for 20X8?

A) $25,000
B) $56,892
C) $31,250
D) $6,250