Eagle, Inc. owns 80% of the outstanding stock of Shadow, Inc. and uses the simple equity method to account for this investment.
• | At the beginning of 20x1, Eagle held merchandise that the company had acquired from Shadow for $60,000. | • | During 20x1, Eagle bought additional goods from its subsidiary for $1,000,000. | • | At December 31, 20x1, $100,000 of these 20x1 purchases remained in Eagle’s inventory. | | |
Shadow Inc. earns a gross profit of 25% on all sales to its parent. |
| Which of the following must the consolidated entity include in the entry it uses to adjust its accounts for the intercompany profit included in Eagle’s beginning inventory? |
