Prince Corp. owned 80% of Kile Corp.'s common stock. During October 2011, Kile sold merchandise to Prince for $140,000. At December 31, 2011, 50% of this merchandise remained in Prince's inventory. For 2011, gross profit percentages were 30% of sales for Prince and 40% of sales for Kile. The amount of unrealized intercompany profit in ending inventory at December 31, 2011 that should be eliminated in the consolidation process is
A) $28,000.
B) $56,000.
C) $22,400.
D) $21,000.
E) $42,000.

Question

Quizplus · Accepted Answer

Prince's share of Kile's profit = $140,000 x 40% x 80% = $44,800Unrealized intercompany profit = $44,800 x 50% = $22,400