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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

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