6 perry instruments international purchased 75 of the outstanding common stock of st 4307661

6 perry instruments international purchased 75 of the outstanding common stock of st 4307661

6) Perry Instruments International purchased 75% of the outstanding common stock of Standard Systems in 1997 when the book values and fair values of Standard's assets and liabilities were equal.  The cost of Perry's investment was equal to 75% of the book value of  Standard's net assets. Separate company income statements for Perry and Standard for the year ended December 31, 2011 are summarized as follows:

Perry Standard

Sales Revenue$2,400,000 $800,000

Investment income from Standard142,000

Cost of Goods Sold(1,600,000)(400,000)

Expenses(450,000)(200,000)

Net Income$492,000 $200,000

During 2011, the companies began to manage their inventory differently, and worked together to keep their inventories low at each location.  In doing so, they agreed to sell inventory to each other as needed at a markup of 10% of cost.  Perry sold merchandise that cost $100,000 to Standard for $110,000, and Standard sold inventory that cost $80,000 to Perry for $88,000.  Half of this merchandise remained in each company's inventory at December 31, 2011.

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