Circle the best choice. 1. The material sale of inventory items by a parent company to an affiliated company a. enters the consolidated revenue computation only if the transfer was the result of arm's length bargaining. b. affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. does not result in consolidated income until the merchandise is sold to outside parties. d. does not require a working paper adjustment if the merchandise was transferred at cost. c. 2. Honeyeater Corporation owns a 40% interest in Nectar Company, acquired several years ago at a cost equal to book value and fair value. Nectar sells merchandise to Honeyeater for the first time in 2020. In computing income from the investee for 2020 under the equity method, Honeyeater uses which equation? 40% of Nectar's income less 100% of the unrealized profit in Honeyeater's ending inventory. 40% of Nectar's income plus 100% of the unrealized profit in Honeyeater's ending inventory. 40% of Nectar's income less 40% of the unrealized profit in Honeyeater's ending inventory. d. 40% of Nectar's income plus 40% of the unrealized profit in Honeyeaters ending inventory. a. b. c