5

A parent sells merchandise to its subsidiary at a markup of 20 percent on cost. The subsidiarys beginning inventory includes $60,000 in merchandise purchased from the parent. The parent sells $240,000 retail value merchandise to the subsidiary during the year. The subsidiarys ending inventory includes $48,000 in merchandise purchased from the parent. Eliminations (I) for intercompany merchandise sales have a net effect of decreasing cost of goods sold by what amount?

Select one:

a. $242,000

b. $42,000

c. $240,000