E 5-7 Downstream sale of inventory Xuma SA was a subsidiary of Fabian SA. Fabian SA had a policy to sell its merchandise at a mark-up of 10 percent. The beginning balance of Xuma’s inventory in 2014, which was sold in the current year, was $220,000. Half of this beginning inventory included merchandise purchased from Fabian SA. During 2014, Fabian SA sold merchandises to Xuma SA for

$550,000. Xuma has sold $440,000 of these merchandises to the third parties. The data of the sales and the cost of sales for both companies are as follows:

Fabian SA Xuma SA Sales $2,200,000 $1,700,000 Cost of Sales $2,000,000 $1,500,000 REQuIRED