P CO owns a 90% interest in S Co, purchased at a time when the book values of S recorded assets and liabilities were equal to fair values. During 2014, S sold merchandise to P cost 32,000 for $40,000 . At December 31, 2014, 75% of this merchandise sold to third party . Separate incomes for P&S are summarized as follows:

P S

Sales $900,000 $200,000

Cost of sales 400,000 100,000

Gross profit 500,000 100,000

Operating expenses 200,000 80,000

Separate income $300,000 $ 20,000 What is amount of realized income from intercompany sales?

Select one:

a. 2,000 profit

b. 2,000 loss

c. 6,000 loss

d. 6,000 profit