On January 1, 2023, 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 2023, Stark sold Panther inventory costing $75,000 for $125,000. As of December 31, 2023, Panther had resold 74 percent of this inventory. In 2024, Panther bought from Stark $140,000 of inventory that had an original cost of $70,000. At the end of 2024, Panther held $38,000 (transfer price) of inventory acquired from Stark, all from its 2024 purchases.

During 2024, 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 2024, Panther and Stark prepared the following statements for consolidation.

a. Show how Panther computed its $39,000 equity in Stark’s earnings balance.

b. Prepare a 2024 consolidated worksheet for Panther and Stark.

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Revenues Cost of goods sold Other operating expenses Gain on sale of land .... Equity in Stark's earnings Net income... ... Retained earnings, 1/1/24 Net income Dividends declared Retained earnings, 12/31/24 .... 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, 12/31/24. Total liabilities and equity.. Panther, Inc. $ (710,000) 305,000 167,000 $ $ $ $ (16,000) (39,000) (293,000) (367,000) (293,000) 80,000 (580,000) 102,000 311,000 691,000 -0- 638,000 -0- $ 1,742,000 $ (462,000) (400,000) (300,000) (580,000) $(1,742,000) Stark Corporation $(360,000) 189,000 81,000 -0- $ (90,000) $(292,000) (90,000) 25,000 $(357,000) $154,000 110,000 -0- 58,000 280,000 125,000 $727,000 $(220,000) (100,000) (50,000) (357,000) $(727,000)