Answer:
The correct option is d. $7,500
Explanation:
For computing the unrealized gain, first we have to compute the gross profit ratio which is shown below:
Since gross profit is not given in the question, so, first we have to find it.
The gross profit formula is shown below:
= Sales revenue - cost of goods sold
= $500,000 - $400,000
= $100,000
Now, gross profit ratio equals to
= (Gross profit ÷ sales revenue) × 100
= ($100,000 ÷ $500,000) × 100
= 20%
In the question, the 25% of merchandise is still held by Tara.
Since merchandise inventory is not given
So, we multiply the gross profit by 25% and 30%
In mathematically,
= Gross profit × 25% × 30%
= $100,000 × 25% × 30%
= $7,500
Hence, the $7,500 amount of unrealized gain must be deferred by Hawkins in reporting on the equity method
Therefore, the correct option is d. $7,500
