Prescott, Inc. owns a 30% interest in Sylvestre, Inc. and ap…
Prescott, Inc. owns a 30% interest in Sylvestre, Inc. and applies the equity method to account for this investment. During the current year, Prescott purchases inventory costing $54,000 and then sells it to Sylvestre for $90,000. At the end of the year, Sylvestre still holds $20,000 of the merchandise acquired from Prescott. What amount of unrealized gross profit must Prescott defer in reporting this investment using the equity method?