On January 1, 2020, Panther, Inc., issued securities with a total fair value of $581,000 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 $333,000, the fair value of its trademarks was assessed to be $67,000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in its accounting records by $181,000. 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 $100,000 for $200,000. As of December 31, 2020, Panther had resold 75 percent of this inventory. In 2021, Panther bought from Stark $171,000 of inventory that had an original cost of $85,500. At the end of 2021, Panther held $46,100 (transfer price) of inventory acquired from Stark, all from its 2021 purchases.

During 2021, Panther sold Stark a parcel of land for $107,300 and recorded a gain of $19,100 on the sale. Stark still owes Panther $74,400 (current liability) related to the land sale.

At the end of 2021, Panther and Stark prepared the following statements for consolidation.

1. Show how Panther computed its $57,725 equity in Stark's earnings balance.

2. Prepare a 2021 consolidated worksheet for Panther and Stark.

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. $ (852,200) 366,600 200, 700 (19,100) (57,725) $ (361,725) $ (377,000) (361,725) 98,800 $ (639,925) $ 135,000 411,100 748,900 0 844,100 Stark Corporation $ (389,000) 204,100 87,400 0 0 $ (97,500) $ (316,600) (97,500) 35,500 $ (378, 600) 186,000 132,400 $ 2,139,100 $ (771,675) (400,000) (327,500) (639,925) $ (2,139,100) 69,700 336,400 150,100 $ 874,600 $ (286,300) (175,000) (34,700) (378, 600) $ (874,600) Required A Required B Show how Panther computed its $57,725 equity in Stark's earnings balance. (Input all amounts as positive values.) Equity in Stark's earnings PANTHER AND STARK Consolidation Worksheet For the Year Ending December 31, 2021 Consolidation Entries Accounts Debit Credit Consolidated Totals 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 equipment (net) Patented technology Total assets Liabilities Common stock Additional paid-in capital Retained earnings 12/31/21 Total liabilities and equity Panther Stark $ (852,200) $ (389,000) 366,600 204,100 200,700 87,400 (19,100) (57,725) 0 $ (361,725) $ (97,500) $ (377,000) $ (316,600) (361,725) (97,500) 98,800 35,500 $ (639,925) $ (378,600) 135,000 $ 186,000 411,100 132,400 748,900 0 69,700 844,100 336,400 0 150,100 $ 2,139,100 $ 874,600 $ (771,675) $ (286,300) (400,000) (175,000) (327,500) (34,700) (639,925) (378,600) $(2,139,100) $ (874,600) 0