On January 1, 2015, Purple Company acquired Salmon Company. Purple paid $300,000 for 80% of Salmon’s common stock. On the date of acquisition, Salmon had the following balance sheet: Buildings, which...

On January 1, 2015, Purple Company acquired Salmon Company. Purple paid $300,000 for 80% of Salmon’s common stock. On the date of acquisition, Salmon had the following balance sheet:

Buildings, which have a 20-year life, are understated by $100,000. Equipment, which has a 5-year life, is understated by $50,000. Any remaining excess is goodwill. Purple uses the simple equity method to account for its investment in Salmon.