Fundamentals of Advanced Accounting 5th Edition by Joe Ben Hoyle,Thomas Schaefer,Timothy Doupnik

Exercise 25

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)