8 Patrick Corporation acquired 100 percent of O Brien Company's outstanding common stock on January 1, for $684,700 in cash. O'Brien reported net assets with a carrying amount of $394,000 at that time. Some of O'Brien's assets either were unrecorded (having been internally developed) or had fair values that differed from book values as follows: 0.66 points Book 68, 580 423,886 Fair Trademarks (indefinite 1ife) Customer relationships (5-year remaining life) Equipment (18-year remaining life) $. 237,580 99,68e 363, 38e Any goodwill is considered to have an indefinite life with no impairment charges during the year. Following are financial statements at the end of the first year for these two companies prepared from their separately maintained accounting systems. O'Brien declared and paid dividends in the same period. Credit balances are indicated by parentheses. O Brien $(1,192,580) 318,808 82,288 26,288 341,45e $(1,187,558) Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien (792,888) 364,808 72,688 $ (355,488) s (383,808) Net income Retained earnings 1/1 Net income Dividends declared $ (746,888) (1,187,558) (355,488) 99,88 Retained earnings 12/31 $(1,692,558) $ (559,488) Cash Receivables Inventory Investment in O'Brien Trademarks Customer relationships Equipment (net) $ 232,808 338,808 233,808 936,158 572,808 129,588 81,988 289,8e0 1,89e,808 $ 3,481,158 (489,888) 73,588 369,8e8 $ 862,998 Total assets Liabilities Common stock Retained earnings 12/31 $(1,388,688) $ (283,588) (188,88) 1,692,558 ai (559,488 Total liabilities and equity $(3,481,158) $ (862,98) a. Which investment method did Patrick use to compute the $341.450 income from O'Brien? b. Determine the totals to be reported for this business combination for the year ending December 31. c. Verify the totals determined in part (b) by producing a consolidation worksheet for Patrick and OBrien for the year ending December 31. Required A Required B Required C Verify the totals determined in part (b) by producing a consolidation worksheet for Patrick and O'Brien for the year ending December 31. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Consolidated Totals column should be entered with a minus sign.) Show less PATRICK CORPORATION AND CONSOLIDATED SUBSIDIARY O'BRIEN Consolidation Worksheet For Year Ending December 31 Consolidation Entries Consolidated Accounts Patrick O'Brien Debit Credit Totals (1,984,500) 682,000 Revenues Cost of goods sold Depreciation expense Amortization expense Income from O Brien (1,192,500) 318,000 82.200 26,200 (341,450) (1,107,550) (792,000) 364,000 72,600 Net income (355,400) (1,302,500) Retained earnings, 1/1 Net income (above) Dividends declared (746,000) (1,107,550) 161,000 (1,692,550) (303,000) (355,400) 99,000 (559,400) (1,302,500) Retained earnings 12/31 (1,302,500) 361,500 419.900 442.000 Cash Receivables Inventory Investment in O'Brien Trademarks Customer relationships Equipment (net) Goodwill 232,000 338,000 233,000 936,150 572,000 129,500 81.900 209,000 73,500 1,090,000 369,000 Total assets 3,401,150 862,900 1,223,400 Liabilities Common stock Retained earnings (above) (1,308,600) (400,000) 1,692,550 (3,401,150) (203,500) (100,000) (559,400) (862,900) (1,302,500) Total liabilities and (1,302,500)