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    Intercompany asset transactions and consolidated financials.

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    King Corporation owns 80% of Lee Corporation's common stock. During October, Lee sold merchandise to King for $100,000. At Dec 31, 50% of this merchandise remains in King's inventory. Gross profit percentages were 30% for King and 40% for Lee. The amount of unrealized intercompany profit in ending inventory at Dec 31 that should be eliminated in the consolidation process is? (AICPA adapted)

    a) $40,000
    b) $20,000
    c) $16,000
    d) $15,000

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    Solution Summary

    This solution provides an explanation for a question involving a company's profit.