On January 1, 2020, Panther, Inc., issued securities with a total fair value of $577,000 for 100

Question:

On January 1, 2020, Panther, Inc., issued securities with a total fair value of $577,000 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 $300,000, the fair value of its
trademarks was assessed to be $45,000 more than their carrying amounts. Additionally, Stark’s
patented technology was undervalued in its accounting records by $232,000. 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 $75,000 for $125,000. As of December 31, 2020, Panther had resold 74 percent of this inventory. In 2021, Panther bought from Stark $140,000 of inventory that had an original cost of $70,000. At the end of 2021, Panther held $38,000 (transfer price) of inventory acquired from Stark, all from its 2021 purchases.

During 2021, Panther sold Stark a parcel of land for $88,000 and recorded a gain of $16,000 on the sale. Stark still owes Panther $62,000 (current liability) related to the land sale. At the end of 2021, Panther and Stark prepared the following statements for consolidation.

Panther, Inc. Stark Corporation Revenues $ 7 10,000) $(360,000) Cost of goods sold Other operating expenses 305,000 189,000 167,000 (16,000) (39,000) $ (293,000) $ (367,000) (293,000) 80,000 81,000 Gain on sale of land Equity in Stark's earnings -0- Net income. $ (90,000) $(292,000) (90,000) Retained earnings, 1/1/21 Net income Dividends