Jubilee, Inc., owns 40 percent of JPW Company and applies the equity method. During the current year, Jubilee buys inventory costing $109,200 and then sells it to JPW for $182,000. At the end of the year, JPW still holds only $26,700 of merchandise. What amount of gross profit must Jubilee defer in reporting this investment using the equity method?

Multiple Choice

• $6,972.

• $12,372.

• $14,772.

• $4,272.