Patrick Corporation acquired 100 percent of O'Brien Company's outstanding common stock on January 1 for $651,800 in cash. O'Brien reported net assets with a carrying amount of $359,000 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) Book Values 79,500 0 368,000 Fair Values $ 271,500 92,700 318, 200 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. O'Brien $ (784,000) 360,000 70,500 0 Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien 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 Total liabilities and equity Patrick $(1,500,000) 400,000 80,400 28,800 (339, 940) $(1,330,740) $ (886,000) (1,330,740) 148,000 $ (2,068,740) $ 237,000 370,000 261,000 905,740 618,000 0 1,026,000 0 $ 3,417,740 $ (949,000) (400,000) (2,068,740) $ (3, 417,740) $ (353,500) $ (259,000) (353,500) 86,000 $ (526,500) $ 151,000 71,700 203,000 0 75,300 0 332,000 0 $ 833,000 $ (206,500) (100,000) (526,500) $ (833, 000) a. Which investment method did Patrick use to compute the $339,940 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. Complete this question by entering your answers in the tabs below. Required A Required B Required C. Determine the totals to be reported for this business combination for the year ending December 31. (Input all amounts as positive values.) Consolidated totals Revenues $ 2,284,000 $ Cost of goods sold Amortization expense Depreciation expense Income from O'Brien 760,000 47,340 145,920 $ 0 Net income $ 1,330,740 Retained earnings, 1/1 886,000 Dividends declared $ 148,000 2,068,740 Retained earnings, 12/31 $ Cash $ 388,000 441,700 Receivables $ $ 464,000 Inventory Investment in O'Brien 0 Trademarks $ Customer relationships Equipment (net) Goodwill $ $ Total assets $ 885,300 74,160 1,313,180 820,500 X 4,386,840 X 1,155,500 400,000 2,068,740 3,624,240 Liabilities $ Common stock $ $ Retained earnings, 12/31 Total liabilities and equities 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.) Show less A PATRICK CORPORATION AND CONSOLIDATED SUBSIDIARY O'BRIEN Consolidation Worksheet For Year Ending December 31 Consolidation Entries Consolidated Accounts Patrick O'Brien Debit Credit Totals Revenues $ Cost of goods sold Depreciation expense Amortization expense (784,000) 360,000 70,500 $ (1,500,000) 400,000 80,400 28,800 (339,940) $ (1,330,740) 0 Income from O'Brien 0 Net income $ (353,500) Retained earnings, 1/1 Net income (above) Dividends declared Retained earnings, 12/31 (886,000) (1,330,740) 148,000 (259,000) (353,500) 86,000 $ (2,068,740) $ (526,500) $ 237,000 $ Cash Receivables 370,000 151,000 71,700 203,000 Inventory Investment in O'Brien Trademarks Customer relationships Equipment (net) Goodwill 261,000 905,740 618,000 0 75,300 0 1,026,000 332,000 0 0 Total assets $ 3,417,740 $ 833,000 Liabilities Common stock Retained earnings (above) Total liabilities and equity (949,000) (400,000) 2,068,740 $ (3,417,740) (206,500) (100,000) (526,500) (833,000) $ $ 0 $ 0