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 shares. 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 $41,700 (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 $ (368,000) 193, 120 82,700 $ 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 rnings, 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, 100) 332,700 182,100 (17,400) (55,425) $ (332,125) $ (371,000) (332,125) 90, 700 $ (612,425) $ 117, eee 356, 600 718, eee $ (92,200) $ (299, 300) (92, 2ee) 29,5ee $ (362, eee) $ 169,00 120,500 731,900 63,400 306,100 136,700 795,700 $ $ 1,923,500 $ (680,375) (400, eee) (310,700) (612,425) $ (1,923,500) $ (241,700) (130,000) (62,000) (362,000) $ (795,700) a. Show how Panther computed its $55,425 equity In Stark's earnings balance. b. Prepare a 2021 consolidated worksheet for Panther and Stark. Complete this question by entering your answers in the tabs below.

Answer 1

Answer

Required A Equity in Stark's earnings Stark reported net income $ Patented technology amortization (199000/8) $ Beginning inventory gross profit recognized (155000*(1-66%))*((155000-77500)/15 $ Ending inventory gross profit deferred (41700*((154000-77000)/154000) $ Deferral of land gain on sale $ Equity in Stark's earnings $ (92,200.00) 24,875.00 (26,350.00) 20,850.00 17,400.00 (55,425.00)

Required B Consolidation Worksheet PANTHER AND STARK Consolidation Worksheet Year Ending December 31, 2021 Consolidation entries Stark Debit Credit Accounts Panther Consolidated Totals (988,100.00) 366,300.00 -154000+26350 289,675.00 Revenues Cost of goods sold Other operating expenses Gain on sale of land Equity in Stark's eanings Net income $ (774,100.00) 5 $ 332,700.00 $ $ 182,100.00 $ $ (17,400.00) $ (55,425.00) $ (332,125.00) 5 (368,000.00) $ 154,000.00 $ 193,100.00 $ 20,850.00 $ 180,350.00 $ 82,700.00 $ 24,875.00 $ $ 17,400.00 $ $ 55,425.00 $ (92,200.00) $ (332,125.00) $ $ Retained earnings 1/1/21 Net income Dividends declared Retained earnings 12/31/21 $ (371,000.00) $ $ (332,125.00) S $ 90,700.00 $ $ (612,425.00) S (299,300.00) $ 299,300.00 (92,200.00) 5 92,200.00 29,500.00 (362,000.00) (371,000.00) (332,125.00) 90,700.00 (612,425.00) $ 29,500.00 $ Cash and receivables $ 117,000.00 $ Inventory $ 356,600.00 $ Investment in Stark $ 718,000.00 Trademarks $ Land, buildings, and equipment (net) $ 731,900.00 $ Patented technology $ Total assets $ 1,923,500.00 $ 169,000.00 $ 67,600.00 $ 120,500.00 $ 20,850.00 $ $ 29,500.00 $ 747,500.00 $ 63,400.00 $ 53,000.00 $ 306,100.00 $ 17,400.00 $ 136,700.00 $ 174,125.00 $ 24,875.00 $ 795,700.00 $ 218,400.00 456,250.00 =718000+29500 116,400.00 1,020,600.00 285,950.00 -199000-24875 2,097,600.00 Liabilities $ (600,375.00) $ Common stock $ (400,000.00) 5 Additional paid-in capital $ (310,700.00) S Retained earnings 12/31/21 $ (612,425.00) $ Total liabilities & stockholders' equity $ (1,923,500.00) $ (241,700.00) $ 67,600.00 (130,000.00) $ 130,000.00 (62,000.00) $ 62,000.00 (362,000.00) $ 362,000.00 (795,700.00) $ $ $ $ (774,475.00) (400,000.00) (310,700.00) (612,425.00) (2,097,600.00) $

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