Problem 4-14 (LO 2, 3) 80%, equity, several excess distributions, inventory, fixed assets, parent and subsidiary sales. Refer to the preceding facts for Purple’s acquisition of Simple common stock. On January 1, 20X2, Simple held merchandise sold to it from Purple for

$14,000. This beginning inventory had an applicable gross profit of 40%. During 20X2, Purple sold merchandise to Simple for $60,000. On December 31, 20X2, Simple held $12,000 of this merchandise in its inventory. This ending inventory had an applicable gross profit of 35%. Simple 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 Simple. This beginning inventory had an applicable gross profit of 25%. During 20X2, Simple 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 Simple $6,000 on December 31 as a result of this intercompany sale.