Mogul Company ships merchandise to Ski Outfit in a consignment arrangement. The arrangement specifies that Ski Outfit will attempt to sell the merchandise, and in return, Mogul will pay to Ski Outfit a 25% sales commission on any merchandise sold. During the year, Mogul ships inventory with a cost of $112,500 to Ski Outfit. By the end of the year, $86,000 of the merchandise has been sold to customers for a total of $118,800. What amount of inventory will Mogul report at year end?

Multiple Choice

• $28,125.

• $6,300.

• $26,500.

• $0.