7. On January 1, 2015, Purple Rain Company acquired Sunshine Company. Purple Rain Company paid $60 per share for 80% of Sunshine's common stock. The price pail by Purple reflected a control premium. The NCI shares were estimated to have a market value of $55 per share. On the date of acquisition, Sunshine had the following balance sheet: Sunshine Company Balance Sheet 1-Jan-15 $ Assets Accounts Receivable Inventory Land Buildings Accumulated Depreciation Equipment Accumulated Depreciation 60,000 40,000 60,000 200,000 (50,000) 72,000 (30,000) Liabilities and Equity Accounts Payable $ 40,000 Bonds Payable 100,000 Common Stock ($1 par) 10,000 Paid in excess of par 90,000 Retained Earnings 112,000 Total Assets $ 352,000 $ 352,000 Buildings, which have a 20-year life, were understated by $120,000. Equipment, which has a 5-year life was understated by $40.000. Any remaining excess was considered goodwill. Purple used the simple equity method to account for its investment in Sunshine. January 1, 2016, Purple held merchandise sold to it from Sunshine for $12,000. This beginning inventory had an applicable gross profit of 20%. During 2016, Sunshine sold merchandise to Purple for $90,000. On December 31, 2016. Purple held $18,000 of this merchandise in its inventory (applicable gross profit rate of 25%). Purple owed Sunshine $20,000 on December 31, 2016 as a result of this intercompany sale. On January 1, 2016. Purple sold equipment with a book value of $35,000 to Sunshine for $45,000. Purple also sold assets to nonaffiliates. During 2016, the equipment was used by Sunshine. Depreciation is computed over a 5-year life, using the straight-line method. 7. On January 1, 2015, Purple Rain Company acquired Sunshine Company. Purple Rain Company paid $60 per share for 80% of Sunshine's common stock. The price pail by Purple reflected a control premium. The NCI shares were estimated to have a market value of $55 per share. On the date of acquisition, Sunshine had the following balance sheet: Sunshine Company Balance Sheet 1-Jan-15 $ Assets Accounts Receivable Inventory Land Buildings Accumulated Depreciation Equipment Accumulated Depreciation 60,000 40,000 60,000 200,000 (50,000) 72,000 (30,000) Liabilities and Equity Accounts Payable $ 40,000 Bonds Payable 100,000 Common Stock ($1 par) 10,000 Paid in excess of par 90,000 Retained Earnings 112,000 Total Assets $ 352,000 $ 352,000 Buildings, which have a 20-year life, were understated by $120,000. Equipment, which has a 5-year life was understated by $40.000. Any remaining excess was considered goodwill. Purple used the simple equity method to account for its investment in Sunshine. January 1, 2016, Purple held merchandise sold to it from Sunshine for $12,000. This beginning inventory had an applicable gross profit of 20%. During 2016, Sunshine sold merchandise to Purple for $90,000. On December 31, 2016. Purple held $18,000 of this merchandise in its inventory (applicable gross profit rate of 25%). Purple owed Sunshine $20,000 on December 31, 2016 as a result of this intercompany sale. On January 1, 2016. Purple sold equipment with a book value of $35,000 to Sunshine for $45,000. Purple also sold assets to nonaffiliates. During 2016, the equipment was used by Sunshine. Depreciation is computed over a 5-year life, using the straight-line method