Ahm Corp. owns 90% of Bee Corp.’s common stock and 80% of Cee Corp.’s common stock. The remaining common shares of Bee and Cee are owned by their respective employees. Bee sells exclusively to Cee, Cee buys exclusively from Bee, and Cee sells exclusively to unrelated companies. Selected 2006 information for Bee and Cee follows:

Bee Corp.

Cee Corp.

Sales

$130,000

$91,000

Cost of sales

100,000

65,000

Beginning inventory

None

None

Ending inventory

None

65,000

What amount should be reported as gross profit in Bee and Cee’s combined income statement for the year ended December 31, 2006?

  1. $26,000
  2. $41,000
  3. $47,800
  4. $56,000