I would like to know if I read this question correctly and have answer it correctly:
King Corporation owns 80% of Lee Corporation’s common stock. During October 2001, Lee sold merchandise to king for $100,000. At December 31, 2001, 50% of this merchandise remains in King’s inventory. For 2001, gross profit percentages were 30% for King and 40% for Lee. The amount of unrealized intercompany profit in ending inventory at December 31, 2001, that should be eliminated in the consolidation process is:

a $40,000
b $20,000
c $16,000
d $15,000
e $18,000

The answer I turned in was (b). ($100K - $50K) times 80%. Is there someone out there that can confirm that I am right or not in giving this as my answer. And if not what is the correct answer. Thanks!

The answer I turned in was (b). ($100K - $50K) times 80%. Is there someone out there that can confirm that I am right or not in giving this as my answer. And if not what is the correct answer. Thanks!

Wow! I cannot believe my eyes that no one is out there that does not have his/her own thoughts regarding this question. I figure that there would be more than zero out there that would be respond with confirmation of either that I was correct or I was totally off the track with my answer. I really am interested in knowing if someone else has come up with the same asnswer as I did or with a different one. Thanks!

On January 2, 2001 Polk borrowed $60,000 and used the proceeds to purchase 90% of the outstanding common shares of Strass. This debt is payable in 10 equal annual principal payments, plus interest, beginning December 31,2004. The excess cost of the investment over the underlying book value of the acquired net assets is allocated to inventory (60%) and to goodwill (40%). On a consolidated balance sheet as of January 2,2001,

Current assets should be
Noncurrent assets should be
Current liabilities should be
Noncurrent liabilities, including noncontrolling interest should be
Stockholders' equity should be