How is the gross profit rate evaluated in this problem

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Reference no: EM136092

How is the gross profit rate evaluated in this problem?

On 1^st January, 2012, Patrick Company purchased 100% of the outstanding voting stock of Shawn, Inc., for $1,000,000 in cash and extra consideration. At the purchasing date, Shawn had common stock of $500,000 and retained earnings of $185,000. Patrick attributed the overload of acquisition-date-fair value over Shawn's book value to a trade name with a 25-year life. Patrick uses the equity technique to account for its investment in Shawn. In the next two years, Shawn reported the given:

Income Dividends Inventory Transfers to Patrick Transfer Price

2012 78,000 25,000 190,000

2013 27,000 27,000 210,000

Reference no: EM136092

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