1)Power Inc. owns 80% of Station Co. and applies the equity method. During the current year, Power bought inventory costing $60,000 and then sold it to Station for $100,000. At year-end, only $24,000 of merchandise was still being held by Station. What amount of intra-entity inventory profit did Power record at the time of the sale?

A. $7,680. B. $9,600. C. $0. D. $32,000. E. $40,000.

3)Power Inc. owns 80% of Station Co. and applies the equity method. During the current year, Power bought inventory costing $60,000 and then sold it to Station for $100,000. At year-end, only $24,000 of merchandise was still being held by Station. What amount of intra-entity inventory profit must be deferred by Power at year-end? (Hint: For an intra-entity transaction, in the year when the inter-entity transferred merchandise is not sold to a third-party or is not consumed then the parent company will defer the unearned gross profit. This question is about a downstream sale from the parent company Power to its subsidiary Station. In a downstream sale, ALL unearned gross profit must be deferred by the parent company at this year-end.) A. $7,680. B. $9,600. C. $0. D. $32,000. E. $40,000.