MC Qu$.06-43$ The financial statements of Post...

The financial statements of Post Company and Stamp Company on December $31,$ Year $5,$ were as follows:

Additional Information

Post owns $70$ percent of Stamp and carries its investment in Stamp on its books by the cost method.

During Year $4,$ Post sold Stamp $$100,000$ worth of merchandise, of which $$60,000$ was resold by Stamp in the year. During Year $5,$ Post

had sales of $$200,000$ to Stamp, of which $40$ percent was resold by Stamp. Intercompany sales are priced to provide Post with a gross

profit of $30$ percent of the sales price.

On December $31,$ Year $4,$ Post had in its inventories $$150,000$ of merchandise purchased from Stamp during Year $4.$ On December $31,$

Year $5,$ Post had in its ending inventories $$100,000$ of merchandise that had resulted from purchases of $$350,000$ from Stamp during

Year $5.$ Intercompany sales are priced to provide Stamp with a gross profit of $60$ percent of the sale price.

Both companies are taxed at $25$ percent.

To calculate Post's consolidated income tax expense, first add together the unadjusted totals from Post's and Stamp's separate$-$entity

financial statements. What is the adjustment to this figure related to the unrealized profit in beginning inventory for the year ended

December $31,$ Year $5?$

A$)$ $$25,500$

B$)$ $$28,000$

C$)$ $$24,000$