P Inc. owns 85 percent of S Inc. During 20X8, P sold goods with a 25 percent gross profit to S. S sold all of these goods in 20X8. How should 20X8 consolidated income statement items be adjusted?

A. Sales and cost of goods sold should be reduced by 85 percent of the intercompany sales.

B. No adjustment is necessary.

C. Net income should be reduced by 85 percent of the gross profit on intercompany sales.

D. Sales and cost of goods sold should be reduced by the intercompany sales.