Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng

Exercise 26

80%, equity, several excess distributions, inventory, fixed assets, parent and subsidiary sales. Refer to the preceding facts for Purple's acquisition of Salmon common stock. On January 1, 2012, Salmon held merchandise sold to it by Purple for $14,000. This beginning inventory had an applicable gross profit of 40%. During 2012, Purple sold merchandise to Salmon for $60,000. On December 31, 2012, Salmon held $12,000 of this merchandise in its inventory. This ending inventory had an applicable gross profit of 35%. Salmon owed Purple $8,000 on December 31 as a result of this intercompany sale. Purple held $12,000 worth of merchandise in its beginning inventory from sales from Salmon. This beginning inventory had an applicable gross profit of 25%. During 2012, Salmon sold merchandise to Purple for $30,000.
Purple held $16,000 of this inventory at the end of the year. This ending inventory had an applicable gross profit of 30%. Purple owed Salmon $6,000 on December 31 as a result of this intercompany sale.
On January 1, 2011, Purple sold equipment to Salmon at a profit of $40,000. Depreciation on this equipment is computed over an 8-year life using the straight-line method.
On January 1, 2012, Salmon sold equipment with a book value of $30,000 to Purple for $54,000. This equipment has a 6-year life and is depreciated using the straight-line method.
Purple and Salmon had the following trial balances on December 31, 2012: