How is the gross profit rate determined in this problem? I know it is 60% but I don't know how it was determined.
On January 1, 2012, Patrick Company purchased 100 percent of the outstanding voting stock of Shawn, Inc., for $1,000,000 in cash and other consideration. At the purchase date, Shawn had common stock of $500,000 and retained earnings of $185,000. Patrick attributed the excess of acquisition-date-fair value over Shawn's book value to a trade name with a 25-year life. Patrick uses the equity method to account for its investment in Shawn. During the next two years, Shawn reported the following:
Income Dividends Inventory Transfers to Patrick at Transfer Price
2012 78,000 25,000 190,000
2013 27,000 27,000 210,000