On January 1, 2017, Panther, Inc., issued securities with a total fair value of $577,000 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 $300,000, the fair value of its trademarks was assessed to be $45,000 more than their carrying amounts. Additionally, Stark's patented technology was undervalued in its accounting records by $232,000. 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 $75,000 for $125,000. As of December 31, 2017, Panther had resold 74 percent of this inventory. In 2018, Panther bought from Stark $140,000 of inventory that had an original cost of $70,000. At the end of 2018, Panther held $38,000 (transfer price) of inventory acquired from Stark, all from its 2018 purchases.

During 2018, Panther sold Stark a parcel of land for $88,000 and recorded a gain of $16,000 on the sale. Stark still owes Panther $62,000 (current liability) related to the land sale.

At the end of 2018, Panther and Stark prepared the following statements in preparation for consolidation.

a. Show how Panther computed its $39,000 equity in Stark's earnings balance.
b. Prepare a 2018 consolidated worksheet for Panther and Stark?

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Panther, Inc. Stark Corporation $ (360,000) 189,000 $(710,000) Revenues Cost of goods sold Other operating expenses .. Gain on sale of land Equity in Stark's earnings 305,000 167,000 (16,000) 39,000) 81,000 Net income $ (293,000 Retained earnings, 1/1/18.. Net income Dividends declared. $ (367,000) (293,000) 80,000 $(580,000) $ (292,000) (90,000) 25,000 $(357 Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Stark Trademarks Land, buildings, and equip. (net). Patented technology $102,000 311,000 691,000 $154,000 110,000 58,000 280,000 125,000 $ 727,000 638,000 $1,742,000 Total assets Liabilities Common stock Additional paid-in capital Retained earnings, 12/31/18 $ (462,000) (400,000) (300,000) $ (220,000) (100,000) (50,000) (580,000)(357.000) Total liabilities and equity .. 1,742 $727