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 $324,000, the fair value of its trademarks was assessed to be $62,000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in its accounting records by $202,000. 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 $90,000 for $180,000. As of December 31, 2020, Panther had resold 69 percent of this inventory. In 2021, Panther bought from Stark $164,000 of inventory that had an original cost of $82,000. At the end of 2021, Panther held $44,300 (transfer price) of inventory acquired from Stark, all from its 2021 purchases. During 2021, Panther sold Stark a parcel of land for $103,000 and recorded a gain of $18,400 on the sale. Stark still owes Panther $71,600 (current liability) related to the land sale. At the end of 2021, Panther and Stark prepared the following statements for consolidation. Stark Corporation $ (378,000) 198,300 84,900 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. $ (820,000) 352,600 193,000 (18,400) (56,900) $ (349,700) $ (374,500) (349,700) 95,500 (628,700) $ 125,000 380,800 728,500 0 $ (94, 800) $ (307,800) (94,800) 32,500 $ (370,100) $ 177,000 126,100 0 66,400 320,500 143,000 833,000 $ (277,450) (155,000) (30,450) (370,100) $ (833, 000) 781,800 $ 2,016, 100 $ (668,300) (400,000) (319, 100) (628,700 $ (2,016, 100) a. Show how Panther computed its $56,900 equity in Stark's earnings balance. b. Prepare a 2021 consolidated worksheet for Panther and Stark. PANTHER AND STARK Consolidation Worksheet For the Year Ending December 31, 2021 Consolidation Entries Accounts Panther Stark Debit Credit Consolidated Totals Revenues 1,018,000 X $ 820,000) 352,600 $ (378,000) 198,300 84,900 $ 180,000 X 22,150 $ (207,900) X 27,900 Cost of goods sold Other operating expenses Gain on sale of land Equity in Stark's earnings 0 18,400 0 56,900 Net income 193,000 (18,400) (56,900) $ (349,700) $ (374,500) (349,700) 95,500 $ (628,700) Retained earnings 1/1/21 307,800 Net income Dividends declared $ (94,800) $ (307,800) (94,800) 32,500 $ (370,100) $ 177,000 126,100 32,500 Retained earnings 12/31/21 Cash and receivables Inventory Investment in Stark $ 125,000 380,800 728,500 71,600 22,150 761,000 0 32,500 Trademarks 0 66,400 781,800 176,750 X 43,650 Land, buildings, and equipment (net) Patented technology Total assets 0 320,500 143,000 $ 833,000 $ 2,016,100 Liabilities $ 71,600 155,000 Common stock $ (668,300) (400,000) (319,100) (628,700) $ (2,016,100) $ (277,450) (155,000) (30,450) (370,100) OOO (874,000) X (400,000) (319,100) (628,700) Additional paid-in capital Retained earnings 12/31/21 30,450 OOOO Total liabilities and equity $ (833,000) $1,051,550 $ 750,900 $ (2,221,950)
