A subsidiary sells merchandise to its parent at a markup of $25\%$ on cost$.$ During the current year, the parent paid $$750,000$ for

merchandise from the subsidiary. By year$-$end, the parent has sold $$700,000$ of merchandise purchased from the subsidiary to

outside customers for $$900,000.$

How do the consolidation working paper eliminating entries affect cost of goods sold?

I net credit of $$900,000$

net credit of $$750,000$

net credit of $$740,000$

I net credit of $$700,000$