10) Hernandez Inc. sold $160,000 in inventory to Diller Co. during 2020 for $250,000. Diller resold $120,000 of this merchandise in 2020 with the remainder to be disposed of during 2021.

Required: Assuming Hernandez owns 30% of Diller and applies the equity method, prepare the journal entry Hernandez should have recorded at the end of 2020 to defer gross profit on intra-entity inventory sales.