On January 1, 2017, Panther, Inc., issued securities with a total fair value of $618,000 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 $338,000, the fair value of its trademarks was assessed to be $72,000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in its accounting records by $208,000. The trademarks were considered to have indefinite lives, and the estimated remaining life of the patented technology was eight years. In 2017, Stark sold Panther inventory costing $107,500 for $215,000. As of December 31, 2017, Panther had resold 68 percent of this inventory. In 2018, Panther bought from Stark $178,000 of inventory that had an original cost of $89,000. At the end of 2018, Panther held $48,000 (transfer price) of inventory acquired from Stark, all from its 2018 purchases. During 2018, Panther sold Stark a parcel of land for $111,800 and recorded a gain of $19,800 on the sale. Stark still owes Panther $77,200 (current liability) related to the land sale. At the end of 2018, Panther and Stark prepared the following statements in preparation for consolidation.

Panther, Inc.				Stark Corporation
Revenues	$	(884,200	)		$	(396,000	)
Cost of goods sold		380,400				207,800
Other operating expenses		208,200				89,000
Gain on sale of land		(19,800	)			0
Equity in Stark's earnings		(63,800	)			0
Net income	$	(379,200	)		$	(99,200	)
Retained earnings 1/1/18	$	(378,500	)		$	(322,200	)
Net income		(379,200	)			(99,200	)
Dividends declared		103,600				37,500
Retained earnings 12/31/18	$	(654,100	)		$	(383,900	)
Cash and receivables	$	141,000			$	192,000
Inventory		429,300				136,600
Investment in Stark		790,600				0
Trademarks		0				71,900
Land, buildings, and equip. (net)		881,600				347,000
Patented technology		0				154,800
Total assets	$	2,242,500			$	902,300
Liabilities	$	(855,600	)		$	(295,900	)
Common stock		(400,000	)			(190,000	)
Additional paid-in capital		(332,800	)			(32,500	)
Retained earnings 12/31/18		(654,100	)			(383,900	)
Total liabilities and equity	$	(2,242,500	)		$	(902,300	)

1. Show how Panther computed its $63,800 equity in Stark's earnings balance.

2. Prepare a 2018 consolidated worksheet for Panther and Stark.

Show how Panther computed its $63,800 equity in Stark's earnings balance. Equity in Stark's earnings PANTHER AND STARK Consolidation Worksheet Year Ending December 31, 2018 Consolidation Entries Consolidated Totals Accounts Panther Stark Debit Credit $ (884,200) $ (396,000) Revenues Cost of goods sold 380,400 207,800 Other operating expenses 208,200 89,000 Gain on sale of land Equity in Stark's earnings (19,800) (63,800) 0 $ (379,200) $ (99,200) Net income Retained earnings 1/1 Net income (above) Dividends declared $ (378,500) $ (322,200) (379,200) (99,200) 103,600 37,500 $ (654,100) $ (383,900) Retained earnings 12/31 Cash and receivables 192,000 141,000 Inventory Investment in Stark Trademarks Land, buildings, and equipment (net) Patented technology 429,300 136,600 790,600 0 71,900 0 881,600 347,000 0 154,800 $ 2,242,500 $ (855,600) Total assets $ 902,300 $ (295,900) Liabilities Common stock (400,000) (190,000) Additional paid-in capital (332,800) (32,500) Retained earnings (above) (654,100) $(2,242,500) (902,300) (383,900) Total liabilities & stockholders' equity Show how Panther computed its $63,800 equity in Stark's earnings balance. Equity in Stark's earnings PANTHER AND STARK Consolidation Worksheet Year Ending December 31, 2018 Consolidation Entries Consolidated Totals Accounts Panther Stark Debit Credit $ (884,200) $ (396,000) Revenues Cost of goods sold 380,400 207,800 Other operating expenses 208,200 89,000 Gain on sale of land Equity in Stark's earnings (19,800) (63,800) 0 $ (379,200) $ (99,200) Net income Retained earnings 1/1 Net income (above) Dividends declared $ (378,500) $ (322,200) (379,200) (99,200) 103,600 37,500 $ (654,100) $ (383,900) Retained earnings 12/31 Cash and receivables 192,000 141,000 Inventory Investment in Stark Trademarks Land, buildings, and equipment (net) Patented technology 429,300 136,600 790,600 0 71,900 0 881,600 347,000 0 154,800 $ 2,242,500 $ (855,600) Total assets $ 902,300 $ (295,900) Liabilities Common stock (400,000) (190,000) Additional paid-in capital (332,800) (32,500) Retained earnings (above) (654,100) $(2,242,500) (902,300) (383,900) Total liabilities & stockholders' equity