On January 1, 2017, Panther, Inc., issued securities with a total fair value of $599,000 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 $353,000, the fair value of its trademarks was assessed to be $79,000 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 $122,500 for $245,000. As of December 31, 2017, Panther had resold 72 percent of this inventory. In 2018, Panther bought from Stark $190,000 of inventory that had an original cost of $95,000. At the end of 2018, Panther held $51,300 (transfer price) of inventory acquired from Stark, all from its 2018 purchases. During 2018, Panther sold Stark a parcel of land for $119,600 and recorded a gain of $21,000 on the sale. Stark still owes Panther $82,000 (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

$

(939,100

)

$

(409,000

)

Cost of goods sold

404,100

214,600

Other operating expenses

221,100

91,900

Gain on sale of land

(21,000

)

0

Equity in Stark's earnings

(69,275

)

0

Net income

$

(404,175

)

$

(102,500

)

Retained earnings 1/1/18

$

(383,000

)

$

(333,000

)

Net income

(404,175

)

(102,500

)

Dividends declared

110,500

41,000

Retained earnings 12/31/18

$

(676,675

)

$

(394,500

)

Cash and receivables

$

155,000

$

208,000

Inventory

471,800

147,800

Investment in Stark

807,800

0

Trademarks

0

77,700

Land, buildings, and equip. (net)

969,100

375,000

Patented technology

0

167,400

Total assets

$

2,403,700

$

975,900

Liabilities

$

(987,325

)

$

(325,700

)

Common stock

(400,000

)

(220,000

)

Additional paid-in capital

(339,700

)

(35,700

)

Retained earnings 12/31/18

(676,675

)

(394,500

)

Total liabilities and equity

$

(2,403,700

)

$

(975,900

)

A. Show how Panther computed its $69,275 equity in Stark's earnings balance.

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

Show how Panther computed its $69,275 equity in Stark's earnings balance.

Equity in Starks earnings

PANTHER AND STARK
Consolidation Worksheet
Year Ending December 31, 2018
			Consolidation Entries
Accounts	Panther	Stark	Debit	Credit	Consolidated Totals
Revenues	$(939,100)	$(409,000)
Cost of goods sold	404,100	214,600
Other operating expenses	221,100	91,900
Gain on sale of land	(21,000)	0
Equity in Stark's earnings	(69,275)	0
Net income	$(404,175)	$(102,500)			$0
Retained earnings 1/1	$(383,000)	$(333,000)
Net income (above)	(404,175)	(102,500)
Dividends declared	110,500	41,000
Retained earnings 12/31	$(676,675)	$(394,500)			$0
Cash and receivables	$155,000	$208,000
Inventory	471,800	147,800
Investment in Stark	807,800	0
Trademarks	0	77,700
Land, buildings, and equipment (net)	969,100	375,000
Patented technology	0	167,400
Total assets	$2,403,700	$975,900			$0
Liabilities	$(987,325)	$(325,700)
Common stock	(400,000)	(220,000)
Additional paid-in capital	(339,700)	(35,700)
Retained earnings (above)	(676,675)	(394,500)
Total liabilities & stockholders equity	$(2,403,700)	$(975,900)	0	0	$0