A wholly-owned subsidiary sells merchandise to its parent at a markup of 20% on cost. During the current year, the parent paid $600,000 for merchandise received from the subsidiary. By year-end, the parent has sold $420,000 of the merchandise to outside customers for $525,000, but still holds the other $180,000 in its ending inventory. The parent uses the complete equity method to record its investment in subsidiary on its own books. What is the impact of the above information on the parent’s equity in net income of subsidiary for the year, as reported on the parent’s books?
Select one:
a.
Subtract $30,000
b.
Add $30,000
c.
Subtract $70,000
d.
Add $70,000