Panner, Inc., owns 35 percent of Watkins and applies the equity method. During the current year, Panner buys inventory costing $73,800 and then sells it to Watkins for $123,000. At the end of the year, Watkins still holds only $24,100 of merchandise. What amount of gross profit must Panner defer in reporting this investment using the equity method?

Multiple Choice

• $3,374.

• $6,374.

• $14,474.

• $10,874.