Pedro Company owns 80 percent of Sunita Ltd. During Year 2, Pedro sold inventory with a 10 percent gross margin to Sunita. Sunita sold ALL of these goods to outsiders in Year 2. How should the Year 2 consolidated income statement be adjusted?

A) Profit attributable to Pedros shareholders should be reduced by 80 percent of the gross profit on the intercompany sales.

B) Profit attributable to Pedros shareholders should be reduced by 100 percent of the gross profit on the intercompany sales.

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

D) Sales and cost of goods sold should be reduced by 80 percent of the intercompany sales.