Honeyeater Corporation owns a 40% interest in Nectar Company, acquired several years ago at a cost equal to book value and fair value. Nectar sells merchandise to Honeyeater for the first time in 2005. In computing income from the investee for 2005 under the equity method, Honeyeater uses which equation?
a. 40% of Nectar's income less 100% of the unrealized profit in Honeyeater's ending inventory.
b. 40% of Nectar's income plus 100% of the unrealized profit in Honeyeater's ending inventory. c. 40% of Nectar's income less 40% of the unrealized profit in Honeyeater's ending inventory. d. 40% of Nectar's income plus 40% of the unrealized profit in Honeyeater's ending inventory.