Which statement is true concerning unrecognized profits in intra-entity inventory sales when an investor uses the equity method?

Multiple Choice

a. The investor and investee make reciprocal entries to defer and recognize inventory profits.

b. The same adjustments are made for upstream and downstream sales.

c. Different adjustments are made for upstream and downstream sales.

d. No adjustments are necessary.

e. Adjustments will be made only when profits are known upon sale to outsiders.