On January 1, 2020, Panther, Inc., issued securities with a total fair value of $582,000 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 $342,000, the fair value of its trademarks was assessed to be $75,000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in its accounting records by $165,000. 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 $112,500 for $225,000. As of December 31, 2020, Panther had resold 74 percent of this inventory. In 2021, Panther bought from Stark $180,000 of inventory that had an original cost of $90,000. At the end of 2021, Panther held $48,600 (transfer price) of inventory acquired from Stark, all from its 2021 purchases.   During 2021, Panther sold Stark a parcel of land for $113,200 and recorded a gain of $20,000 on the sale. Stark still owes Panther $78,000 (current liability) related to the land sale.   At the end of 2021, Panther and Stark prepared the following statements for consolidation.     Panther, Inc.   Stark Corporation Revenues $ (893,400 )   $ (398,000 ) Cost of goods sold   384,400       208,800   Other operating expenses   210,400       89,400   Gain on sale of land   (20,000 )     0   Equity in Stark's earnings   (64,125 )     0   Net income $ (382,725 )   $ (99,800 ) Retained earnings, 1/1/21 $ (380,000 )   $ (324,200 ) Net income   (382,725 )     (99,800 ) Dividends declared   104,600       38,500   Retained earnings, 12/31/21 $ (658,125 )   $ (385,500 ) Cash and receivables $ 146,000     $ 198,000   Inventory   444,500       140,800   Investment in Stark   765,900       0   Trademarks   0       74,1

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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On January 1, 2020, Panther, Inc., issued securities with a total fair value of $582,000 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 $342,000, the fair value of its trademarks was assessed to be $75,000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in its accounting records by $165,000. 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 $112,500 for $225,000. As of December 31, 2020, Panther had resold 74 percent of this inventory. In 2021, Panther bought from Stark $180,000 of inventory that had an original cost of $90,000. At the end of 2021, Panther held $48,600 (transfer price) of inventory acquired from Stark, all from its 2021 purchases.

 

During 2021, Panther sold Stark a parcel of land for $113,200 and recorded a gain of $20,000 on the sale. Stark still owes Panther $78,000 (current liability) related to the land sale.

 

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

 

  Panther, Inc.   Stark Corporation
Revenues $ (893,400 )   $ (398,000 )
Cost of goods sold   384,400       208,800  
Other operating expenses   210,400       89,400  
Gain on sale of land   (20,000 )     0  
Equity in Stark's earnings   (64,125 )     0  
Net income $ (382,725 )   $ (99,800 )
Retained earnings, 1/1/21 $ (380,000 )   $ (324,200 )
Net income   (382,725 )     (99,800 )
Dividends declared   104,600       38,500  
Retained earnings, 12/31/21 $ (658,125 )   $ (385,500 )
Cash and receivables $ 146,000     $ 198,000  
Inventory   444,500       140,800  
Investment in Stark   765,900       0  
Trademarks   0       74,100  
Land, buildings, and equip. (net)   912,900       357,600  
Patented technology   0       159,600  
Total assets $ 2,269,300     $ 930,100  
Liabilities $ (875,375 )   $ (318,650 )
Common stock   (400,000 )     (200,000 )
Additional paid-in capital   (335,800 )     (25,950 )
Retained earnings, 12/31/21   (658,125 )     (385,500 )
Total liabilities and equity $ (2,269,300 )   $ (930,100 )
 

 

  1. Show how Panther computed its $64,125 equity in Stark's earnings balance.

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

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