Perkins Company owns 85% of Sheraton Company. Perkins Company sells merchandise to Sheraton Company at 20% above cost (gross profit). During 2011 and 2012, such sales amounted to $400,000 and $500,000, respectively. At the end of each year, Sheraton Company had sold 50% of inventory purchased from Perkins to third parties. Calculate the amount of intercompany sales that need to be eliminated in 2011 and 2012?
a. $400,000 for 2011 and $500,000 for 2012
b. $80,000 for 2011 and $100,000 for 2012
c. $0 for 2011 and $100,000 for 2012