Question

On January 1, 2020. Panther, Inc., issued securities with a total fair value of $564.000 for 100 percent of Stark Corporation's outstanding ownership st ares. Stark has long supplied inventory to Panther. The companies expect to achieve synergies with production scheduling and product development with this combination. Although Stark's book value at the acquisition date was $312,000, the fair value of its trademarks was assessed to be $53.000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in its accounting records by $199.000. The trademarks were considered to have indefinite lives, and the estimated remaining life of the patented technology was eight years. In 2020. Stark sold Panther inventory costing $77.500 for $155.000. As of December 31, 2020. Panther had resold 66 percent of this inventory. In 2021, Panther bought from Stark $154.000 of inventory that had an original cost of $77.000. At the end of 2021, Panther held $41700 (transfer price) of inventory acquired from Stark, all from its 2021 purchases. During 2021. Panther sold Stark a parcel of land for $96.800 and recorded a gain of $17.400 on the sale. Stark still owes Panther $67.600 (current liability) related to the land sale. At the end of 2021, Panther and Stark prepared the following statements for consolidation. Stark Corporation $ (368,690) 193, 109 82,700 3 Revenues Cost of goods sold Other operating expenses Gain on sale of land Equity in Stark's earnings Net income Retained earnings, 1/1/21 Net income Dividends declared Retained earnings, 12/31/21 Cash and receivables Inventory Investment in Stark Trademarks Land, buildings, and equip. (net) Patented technology Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/21 Total liabilities and equity Panther, Inc. $ (774,180) 332,700 182,100 (17,400) (55,425) $ (332,125) $ (371, eee) (332,125) 99,700 $ (612,425) $ 117,800 356,600 718, 80e $ (92,200) $ (299, 300) (92,200) 29,500 $ (362,890) $ 169, eae 120, 500 731,900 $ 1,923,500 $ (680,375) (480,000) (310,700) (612, 425) $ (1,923,500) 63,400 386,100 136,700 $ 795,700 $ (241,700) (130,00) (62, eae) (362,000) $ (795,700) .. Show how Panther computed its $55.425 equity in Stark's earnings balance. b. Prepare a 2021 consolidated worksheet for Panther and Stark. Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Show how Panther computed its $55,425 equity in Stark's earnings balance. (Input all amounts as positive values.) Stari rented net income 02 20

Answer 1

a
	Stark Reported Net Inome	-92200
	Patented Technology amortization	24875
	Beginning Inventory gross profit Recognized 155000*(1-66%)*((155000-77500)/155000)	-26350
	Ending inventory gross profit deferred	20850
	Gain on sale of land	17400
	Equity in Stark's earnings	-55425
b	PANTHER AND STARK
	Consolidated Worksheet
	For the Year ending December 31, 2021
				Consolidated entries
	Accounts	Panther	Stark	Debit	Credit	Consolidated Totals
	Revenues	-774100	-368000	154000
	Cost of goods sold	332700	193100	20850	180350
	Other operating expenses	182100	82700	24875
	Gain on sale of land	-17400	0	17400
	Equity in stark's earnings	-55425	0	55425
	Net Income	-332125	-92200			332125
	Retained Earnings 1/1/21	-371000	-299300	299300		371000
	Net Income	-332125	-92200			332125
	Dividend declared	90700	29500		29500	90700
	Retained Earnings 31/12/21	-612425	-362000			612425
	cash and receivables	117000	169000		67600	218400
	Inventory	356600	120500		20850	456250
	Investment inn stark	718000	0	29500	747500
	Trademarks	0	63400	53000		116400
	Land , Buildings and Equipment (net)	731900	306100		17400	1020600
	Patented technology	0	136700	174125	24875	285950
	Total assets	1923500	796700			2097600
	Liabilities	-600375	-241700	67600		-774475
	Common stock	-400000	-130000	130000		-400000
	Additional Paid-in Capital	-310700	-62000	62000		-310700
	Retained Earnings	-612425	-362000			-612425
	Total liabilities and Equity	-1923500	-795700	1088075	1088075	-2097600