|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?