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Fanner, Inc., owns 30 percent of Watkins and applies the equity method. During the current year, Panner buys inventory costing 554,000 and then sells it to Watkins for 590,000. At the end of the year, Watkins still holds only $20,000 of merchandise. What amount of unrealized grass profit must Panner defer in reporting this investment using the equity method?

a. $2,400.

b. $4,800.

c. $8,000.

d. $10,800.

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