Salli Corporation regularly purchases merchandise from their 90% owner,Playtime Corporation.Playtime purchased the 90% interest at a cost equal to 90% of the book value of Salli's net assets.At the time of acquisition,the book values and fair values of Salli's assets and liabilities were equal.Playtime makes their sales to Salli at 120% of cost.In 2014,Salli reported net income of $460,000,and made purchases totaling $172,000 from Playtime.Although Salli had no inventory on hand at the beginning of 2014 that they had purchased from Playtime,at year end,they had $51,600 of this merchandise in inventory.
Required:
1.Determine the unrealized profit in Salli's inventory at December 31,2014.
2.Compute Playtime's income from Salli for 2014.

Question

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The Answer of Salli Corporation regularly purchases merchandise from their 90% owner,Playtime Corporation.Playtime purchased the 90% interest at a cost equal to 90% of the book value of Salli's net assets.At the time of acquisition,the book values and fair values of Salli's assets and liabilities were equal.Playtime makes their sales to Salli at 120% of cost.In 2014,Salli reported net income of $460,000,and made purchases totaling $172,000 from Playtime.Although Salli had no inventory on hand at the beginning of 2014 that they had purchased from Playtime,at year end,they had $51,600 of this merchandise in inventory.
Required:
1.Determine the unrealized profit in Salli's inventory at December 31,2014.
2.Compute Playtime's income from Salli for 2014.

Salli Corporation Regularly Purchases Merchandise from Their 90% Owner,Playtime Corporation