Problem 6-12 (LO 4) Worksheet, separate tax, simple equity, inventory, fixed asset sale, analyze price, later year. Refer to the preceding facts for Penstar’s acquisition of Solar common stock. Penstar accounts for its investment in Solar using the simple equity method, including income tax effects. During 20X3, Solar sold $40,000 worth of merchandise to Penstar.

As a result of these intercompany sales, Penstar held beginning inventory of $16,000 and ending inventory of $10,000 of merchandise acquired from Solar. At December 31, 20X3, Penstar owed Solar $8,000 from merchandise sales. Solar has a gross profit rate of 30%.

During 20X3, Penstar sold $60,000 worth of merchandise to Solar. Solar held $15,000 of this merchandise in its ending inventory. Solar owed $10,000 to Penstar as a result of these intercompany sales. Penstar has a gross profit rate of 40%.