On January 1, 2023, Panther, Incorporated, issued securities with a total fair value of $616,000 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 $350,000, the fair value of its trademarks was assessed to be $78,000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in its accounting records by $188,000. The trademarks were considered to have indefinite lives, and the estimated remaining life of the patented technology was eight years. In 2023, Stark sold Panther inventory costing $120,000 for $240,000. As of December 31, 2023, Panther had resold 77 percent of this inventory. In 2024, Panther bought from Stark $187,000 of inventory that had an original cost of $93,500. At the end of 2024, Panther held $50,500 (transfer price) of inventory acquired from Stark, all from its 2024 purchases. During 2024, Panther sold Stark a parcel of land for $117,700 and recorded a gain of $20,700 on the sale. Stark still owes Panther $80,800 (current liability) related to the land sale. At the end of 2024, Panther and Stark prepared the following statements for consolidation. Items Revenues Cost of goods sold Other operating expenses Gain on sale of land Equity in Stark's earnings Net income Retained earnings, 1/1/24 Inventory Net income Dividends declared Retained earnings, 12/31/24 Cash and receivables Investment in Stark Trademarks Land, buildings, and equipment (net) Patented technology Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/24 Total liabilities and equity Required: Panther, Incorporated $ (925,400) 398,200 217,900 (20,700) (59,950) $ (389,950) $ (382,500) (389,950) 106,600 $ (665,850) $ 153,000 Stark Corporation $ (406,000) 213,000 91,200 0 $ (101,800) $ (330,700) (101,800) 40,500 $ (392,000) $ 205,000 145,700 465,700 820,400 0 ° 76,600 956,500 369,700 0 165,000 $ 2,395,600 $ 962,000 $ (990,850) (400,000) (338,900) (665,850) $ (314,650) $ (2,395,600) (215,000) (40,350) (392,000) $ (962,000) a. Show how Panther computed its $59,950 equity in Stark's earnings balance. b. Prepare a 2024 consolidated worksheet for Panther and Stark.

On January 1, 2023, Panther, Incorporated, issued securities with a total fair value of $616,000 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 $350,000, the fair value of its trademarks was assessed to be $78,000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in its accounting records by $188,000. The trademarks were considered to have indefinite lives, and the estimated remaining life of the patented technology was eight years. In 2023, Stark sold Panther inventory costing $120,000 for $240,000. As of December 31, 2023, Panther had resold 77 percent of this inventory. In 2024, Panther bought from Stark $187,000 of inventory that had an original cost of $93,500. At the end of 2024, Panther held $50,500 (transfer price) of inventory acquired from Stark, all from its 2024 purchases. During 2024, Panther sold Stark a parcel of land for $117,700 and recorded a gain of $20,700 on the sale. Stark still owes Panther $80,800 (current liability) related to the land sale. At the end of 2024, Panther and Stark prepared the following statements for consolidation. Items Revenues Cost of goods sold Other operating expenses Gain on sale of land Equity in Stark's earnings Net income Retained earnings, 1/1/24 Inventory Net income Dividends declared Retained earnings, 12/31/24 Cash and receivables Investment in Stark Trademarks Land, buildings, and equipment (net) Patented technology Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/24 Total liabilities and equity Required: Panther, Incorporated $ (925,400) 398,200 217,900 (20,700) (59,950) $ (389,950) $ (382,500) (389,950) 106,600 $ (665,850) $ 153,000 Stark Corporation $ (406,000) 213,000 91,200 0 $ (101,800) $ (330,700) (101,800) 40,500 $ (392,000) $ 205,000 145,700 465,700 820,400 0 ° 76,600 956,500 369,700 0 165,000 $ 2,395,600 $ 962,000 $ (990,850) (400,000) (338,900) (665,850) $ (314,650) $ (2,395,600) (215,000) (40,350) (392,000) $ (962,000) a. Show how Panther computed its $59,950 equity in Stark's earnings balance. b. Prepare a 2024 consolidated worksheet for Panther and Stark.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 62P

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