On January 1, 2020, Panther, Inc., issued securities with a total fair value of $588,000 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 $322,000, the fair value of its trademarks was assessed to be $60,000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in its accounting records by $206,000. 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 $87,500 for $175,000. As of December 31, 2020, Panther had resold 80 percent of this inventory. In 2021, Panther bought from Stark $162,000 of inventory that had an original cost of $81,000. At the end of 2021, Panther held $43,800 (transfer price) of inventory acquired from Stark, all from its 2021 purchases.

During 2021, Panther sold Stark a parcel of land for $101,800 and recorded a gain of $18,200 on the sale. Stark still owes Panther $70,800 (current liability) related to the land sale. At the end of 2021, Panther and Stark prepared the following statements for consolidation.

Stark Corporation $ (375, 000) 196,700 84,200 0 Revenues Cost of goods sold Other operating expenses Gain on sale of land Equity in Stark's earnings Net income Retained earnings, 1/1/21 Net income Dividends declared Retained earnings, 12/31/21 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, 12/31/21 Total liabilities and equity Panther, Inc. $ (810, 800) 348,600 190,800 (18,200) (45,750) $ (335,350) (373,500) (335,350) 91,600 $ (617,250) $ 124,000 377,800 736,100 $ (94,100) $ (305,500) (94,100) 32,000 $ (367,600) $ 176,000 125,400 0 66,000 318,600 142,200 $ 828, 200 $ (266,500) (150,000) (44,100) (367,600) $ (828,200) 775,600 $ 2,013,500 $ (679,450) (400,000) (316,800) (617,250) $ (2,013,500) a. Show how Panther computed its $45,750 equity in Stark's earnings balance. b. Prepare a 2021 consolidated worksheet for Panther and Stark. Required A Required B Show how Panther computed its $45,750 equity in Stark's earnings balance. (Input all amounts as positive values.) Equity in Stark's earnings Accounts Consolidated Totals Revenues Cost of goods sold Other operating expenses Gain on sale of land Equity in Stark's earnings Net income Retained earnings 1/1/21 Net income Dividends declared Retained earnings 12/31/21 Cash and receivables Inventory Investment in Stark Trademarks Land, buildings, and equipment (net) Consolidation Worksheet For the Year Ending December 31, 2021 Consolidation Entries Panther Stark Debit Credit $ (810,800) $ (375,000) 348,600 196,700 190,800 84,200 (18,200) 0 (45,750) 0 $ (335,350) $ (94, 100) $ (373,500) $ (305,500) (335,350) (94.100) 91,600 32,000 $ (617,250) $ (367,600) $ 124,000 $ 176,000 377,800 125,400 736,100 0 0 66,000 775,600 318,600 Patented technology Total assets Liabilities Common stock Additional paid-in capital Retained earnings 12/31/21 Total liabilities and equity 0 142,200 $ 2,013,500 $ 828,200 $ (679,450) $ (266,500) (400,000) (150,000) (316,800) (44,100) (617,250) (367,600) $ (2,013,500) $ (828,200)