Investor owns 30% of investee and applies the equity method. in 2020, investor sells merchandise costing $240,000 to investee for $300,000. investee's ending inventory includes $50,000 purchased from investor.

We should eliminate 3,000 revenue for this sale as is considered intra-entity therefore, there is no gain realized.

Explanation:

The transactions intra-entity should be eliminated.

We should eliminate the revenue from the goods that are still in the inventory of the investee.

inventory sold:            300,000

remaining inventory:     50,000

remaining goods 50,000/300,000 = 1/6

Then, total revenue: 300,000 - 240,000 = 60,000

1/6 of this revenue is still in the investee 60,000 x 1/6 = 10,000

then we should eliminate the percentage of ownership we got on the investee

30% of this belong to the investor so it should be eliminated while the other 70% is kept.

10,000 x 30% = 3,000

answer; personality;