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 intercompany profit in ending inventory at December 31 that should be elim¬ inated in the consolidation process is LO8

a. $40,000.

b. $20,000.

c. $16,000.

d. $15,000.

(AICPA adapted)