Question: When the Parent uses the cost method to account for the investment in the subsidiary, what entries are made on the Parent's books to eliminate

When the Parent uses the cost method to account for the investment in the subsidiary, what entries are made on the Parent's books to eliminate the unrealized profit in ending inventory from a downstream sale of merchandise? The parent should decrease

its portion of the equity in the Subsidiary's net income and ending inventory.

its investment in the Subsidiary and its portion of the equity in the Subsidiary's net income.

its sales and cost of goods sold.

none of the above

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