On January 1, 2017, Panther, Inc., issued securities with a total fair value of $592,000 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 $348,000, the fair value of its trademarks was assessed to be $77,000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in its accounting records by $167,000. 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 $117,500 for $235,000. As of December 31, 2017, Panther had resold 62 percent of this inventory. In 2018, Panther bought from Stark $184,000 of inventory that had an original cost of $92,000. At the end of 2018, Panther held $49,700 (transfer price) of inventory acquired from Stark, all from its 2018 purchases.

During 2018, Panther sold Stark a parcel of land for $115,800 and recorded a gain of $20,400 on the sale. Stark still owes Panther $79,600 (current liability) related to the land sale.

At the end of 2018, Panther and Stark prepared the following statements in preparation for consolidation a. Show how Panther computed its $79,625 equity in Stark's earnings balance.

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

Stark Corporation $ (403,000) 211,400 90,500 Panther, Inc. $ (911, 700) 392,300 214,700 (20,400) (79, 625) $ (404,725) $ (381,500) (404,725) 110,600 $ (675,625) 150,000 456,600 784,400 Revenues Cost of goods sold Other operating expenses Gain on sale of land Equity in Stark's earnings Net income Retained earnings 1/1/18 Net income Dividends declared Retained earnings 12/31/18 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 12/31/18 Total liabilities and equity $ $ (101,100) (328,400) (101,100) 39,500 (390,000) 202,000 143,600 $ $ 937,800 0 $ $ $ 2,328,800 $ (915,075) (400,000) (338, 100) (675, 625) $ (2,328,800) 75,500 364,400 162,600 948,100 (320, 700) (210,000) (27,400) (390,000) (948, 100) $ A. Show how Panther computed its $79,625 equity in Stark's earnings balance. ry list air value in excess of book value atented technology amortization tark reported net income Beginning inventory gross profit recognized Book value of subsidiary Deferral of land gain on sale Ending inventory gross profit deferred