On January 1, 2017, Perry Company purchased 80% of Selby Company for $990,000. At that time Selby had capital stock outstanding of $350,000 and retained earnings of $375,000.

The fair value of Selby Companys assets and liabilities is equal to their book value except for the following:

COMPREHENSIVE

Fair Value

Inventory $210,000 Plant and Equipment (10-year life) 780,000

Book Value

$160,000 630,000

One-half of the inventory was sold in 2017, the remainder was sold in 2018.

At the end of 2017, Perry Company had in its ending inventory $60,000 of merchandise it had purchased from Selby Company during the year. Selby Company sold the merchandise at 25% above cost. During 2018, Perry Company sold merchandise to Selby Company for $310,000 at a markup of 20% of the selling price. At December 31, 2018, Selby still had mer- chandise that it purchased from Perry Company for $82,000 in its inventory.