Part A and C only
Patrick Corporation acquired 100 percent of O'Brien Company's outstanding common stock on January 1 for $724,300 in cash. O'Brien reported net assets with a carrying amount of $445,000 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: Trademarks (indefinite life) Customer relationships (5-year remaining life) Equipment (10-year remaining life) Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien Any goodwill is considered to have an indefinite life with no impairment charges during the year. The 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. Net income Retained earnings 1/1 Net income Dividends declared Retained earnings 12/31 Cash Receivables Inventory Investment in O'Brien Trademarks Customer relationships. Equipment (net) Goodwill Total assets Liabilities Common stock Retained earnings 12/31 Book Values $ 75,000 0 359,000 Total liabilities and equity Patrick $(1,822,500) 486,000 93,000 38,400 (295,570) $(1,500, 670) $ (764,000) (1,500,670) 146,000 $(2,118,670) $ 279,000 358,000 196,000 935,870 542,000 0 1,028,000 $ 3,338,870 $ (820, 200) (400,000) (2,118,670) $(3,338,870) Fair Values $ 258,000 93,600 301, 100 0 O'Brien $ (748,000) 342,000 97,500 9 0 $ (308,500) $ (345,000) (308,500) 84,000 $ (569,500) $ 148,500 77,100 224,000 0 76,200 0 272,000 0 $ 797,800 $ (128,300) (100,000) (569,500) $ (797,800) a. Which investment method did Patrick use to compute the $295,570 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 O'Brien 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. Input all amounts as positive values.) Accounts Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien Net income Retained earnings, 1/1 Net income (above) Dividends declared Retained earnings, 12/31 Cash Receivables Inventory Investment in O'Brien PATRICK CORPORATION AND CONSOLIDATED SUBSIDIARY O'BRIEN Consolidation Worksheet For Year Ending December 31 Trademarks Customer relationships Equipment (net) Goodwill Total assets Liabilities Common stock Retained earnings (above) Total liabilities and equity Patrick $ (1,822,500) $ 486,000 93,000 38,400 (295,570) $ (1,500,670) S $ $ (764,000) (1,500,670) 146,000 (2,118,670) S 279,000 $ 358,000 196,000 935,870 542,000 0 1,028,000 0 $ 3,338,870 $ O'Brien (748,000) 342,000 97,500 0 0 (308,500) (345,000) (308,500) 84,000 (569,500) 148,500 77,100 224,000 76,200 0 272,000 0 797,800 (820,200) (400,000) (2,118,670) (569,500) $ (3,338,870) $ (797,800) $ (128,300) (100,000) Consolidation Entries Debit Credit 0 $ 0 Consolidated Totals Show less
