On January 1, 2020, Panther, Inc., issued securities with a total fair value of $577,000 for 100 percent of StarkCorporation's outstanding ownership shares. Stark has long supplied inventory to Panther. The companies expect toachieve synergies with production scheduling and product development with this combination.Although Stark's book value at the acquisition date was $300,000, the fair value of its trademarks was assessed tobe $45,000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in itsaccounting records by $232,000. The trademarks were considered to have indefinite lives, and the estimatedremaining life of the patented technology was eight years.In 2020, Stark sold Panther inventory costing $75,000 for $125,000. As of December 31, 2020, Panther had resold74 percent of this inventory. In 2021, Panther bought from Stark $140,000 of inventory that had an original cost of$70,000. At the end of 2021, Panther held $38,000 (transfer price) of inventory acquired from Stark, all from its 2021purchases.During 2021, Panther sold Stark a parcel of land for $88,000 and recorded a gain of $16,000 on the sale. Stark stillowes Panther $62,000 (current liability) related to the land sale. At the end of 2021, Panther and Stark prepared the following statements for consolidation.StarkPanther, Inc.Corporation$ (360,000)189,000Revenues$(710,000)Cost of goods soldOther operating expensesGain on sale of landEquity in Stark's earnings305,000167,000(16,000)(39,000)81,000$ (90,000)$ (292,000)(90,000)25,000$ (357,000)$ 154,000110,000Net income$(293,000)(367,000)$(293,000)Retained earnings 1/1/21Net incomeDividends declared80,000(580,000)Retained earnings 12/31/21Cash and receivables102,000311,000691,000InventoryInvestment in StarkTrademarks58,000280,000125,000$ 727,000$ (220,000)(100,000)(50,000)(357,000)$ (727,000)Land, buildings, and equip. (net)Patented technology638,000Total assets$ 1,742,000(462,000)(400,000)(300,000)(580,000)$ (1,742,000)LiabilitiesCommon stockAdditional paid-in capitalRetained earnings 12/31/21Total liabilities and equitya. Show how Panther computed its $39,000 equity in Stark's earnings balance.b. Prepare a 2021 consolidated worksheet for Panther and Stark.

Allocation of excess of fair value over book value Amount ($) Consideration…

At the end of 2021, Panther and Stark prepared the following statements for consolidation. Stark Panther, Inc. 2$ (710,000) 305,000 167,000 (16,000) (39,000) Corporation $ (360,000) 189,000 81,000 Revenues Cost of goods sold Other operating expenses Gain on sale of land Equity in Stark's earnings $ (90,000) $ (292,000) (90,000) 25,000 Net income 2$ (293,000) Retained earnings 1/1/21 (367,000) (293,000) 80,000 2$ Net income Dividends declared Retained earnings 12/31/21 2$ (580,000) $ (357,000) $154,000 110,000 Cash and receivables 2$ Inventory Investment in Stark 102,000 311,000 691,000 58,000 280,000 125,000 Trademarks Land, buildings, and equip. (net) Patented technology 638,000 $ 1,742,000 $ 727,000 $ (220,000) (100,000) (50,000) (357,000) Total assets (462,000) (400,000) (300,000) (580,000) Liabilities $ Common stock Additional paid-in capital Retained earnings 12/31/21 Total liabilities and equity $ (1,742,000) $ (727,000) a. Show how Panther computed its $39,000 equity in Stark's earnings balance. b. Prepare a 2021 consolidated worksheet for Panther and Stark.

At the end of 2021, Panther and Stark prepared the following statements for consolidation. Stark Panther, Inc. 2$ (710,000) 305,000 167,000 (16,000) (39,000) Corporation $ (360,000) 189,000 81,000 Revenues Cost of goods sold Other operating expenses Gain on sale of land Equity in Stark's earnings $ (90,000) $ (292,000) (90,000) 25,000 Net income 2$ (293,000) Retained earnings 1/1/21 (367,000) (293,000) 80,000 2$ Net income Dividends declared Retained earnings 12/31/21 2$ (580,000) $ (357,000) $154,000 110,000 Cash and receivables 2$ Inventory Investment in Stark 102,000 311,000 691,000 58,000 280,000 125,000 Trademarks Land, buildings, and equip. (net) Patented technology 638,000 $ 1,742,000 $ 727,000 $ (220,000) (100,000) (50,000) (357,000) Total assets (462,000) (400,000) (300,000) (580,000) Liabilities $ Common stock Additional paid-in capital Retained earnings 12/31/21 Total liabilities and equity $ (1,742,000) $ (727,000) a. Show how Panther computed its $39,000 equity in Stark's earnings balance. b. Prepare a 2021 consolidated worksheet for Panther and Stark.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

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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…
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