Use the Following Information to Answer the Question(s)below

question 4

Multiple Choice

Use the following information to answer the question(s) below.
Pouch Corporation acquired an 80% interest in Shenley Corporation on January 1,2014,when the book values of Shenley's assets and liabilities were equal to their fair values.The cost of the 80% interest was equal to 80% of the book value of Shenley's net assets.During 2014,Pouch sold merchandise that cost $70,000 to Shenley for $86,000.On December 31,2014,three-fourths of the merchandise acquired from Pouch remained in Shenley's inventory.Separate incomes (investment income not included) of the two companies are as follows:
-Swamp Co. ,a 55%-owned subsidiary of Pond Inc. ,made the following entry to record a sale of merchandise to Pond:
All Swamp sales are at 125% of cost.One-fourth of this merchandise remained in the Pond's inventory at year-end.A working paper entry to eliminate unrealized profits from consolidated inventory would include a credit to Inventory in the amount of

• A)$2,000.
• B)$2,500.
• C)$8,000.
• D)$10,000.

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