Patrick Corporation acquired 100 percent of O'Brien Company's outstanding common stock on January 1 for $623,500 in cash. O'Brien reported net assets with a carrying amount of $364,000 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: Book Values $ 86,500 Trademarks (indefinite life) Customer relationships (5-year remaining life) Equipment (10-year remaining life) Fair Values $ 215,500 92,400 305,300 347,000 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. 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 Patrick $(1,867,500) 498,000 88, 200 37,400 (377,490) $(1,621,390) $ (736,000) (1,621,390) 152,000 $(2,205, 390) $ 222,000 422,000 216,000 910,990 598,000 O'Brien $ (896,000) 416,000 88, 200 0 0 $ (391, 800) $ (264,000) (391,800) 90,000 $ (565, 800) $ 130,500 83,100 223,000 65,400 0 292,000 1,078,000 T-L. & AAC non 701 an 65,400 598,000 0 1,078,000 Trademarks Customer relationships Equipment (net) Goodwill Total assets Liabilities Common stock Retained earnings 12/31 Total liabilities and equity $ 3,446,990 $ (841,600) (400,000) (2,205,390) $ (3,446,990) 292,000 0 $ 794,000 $ (128, 200) (100,000) (565, 800) $ (794, 000) a. Which investment method did Patrick use to compute the $377,490 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 Which investment method did Patrick use to compute the $377,490 income from O'Brien? Which investment method did Patrick use to compute the $377,490 income from O'Brien? Consolidated totals Revenues Cost of goods sold Amortization expense Depreciation expense Income from O'Brien Net income Retained earnings, 1/1 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 equities Consolidated Totals $ Accounts Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien Net income Consolidation Worksheet For Year Ending December 31 Consolidation Entries Patrick O'Brien Debit Credit (1,867,500) $ (896,000) 498,000 416,000 88,200 88,200 37,400 0 (377,490) 0 (1,621,390) $ (391,800) $ Retained earnings, 1/1 Net income (above) Dividends declared Retained earnings, 12/31 (736,000) (1,621,390) 152,000 (2,205,390) $ (264,000) (391,800) 90,000 (565,800) $ $ 130,500 83,100 223,000 Cash Receivables Inventory Investment in O'Brien Trademarks Customer relationships Equipment (net) Goodwill Total assets 222,000 $ 422,000 216,000 910,990 598,000 0 1,078,000 65,400 0 292,000 0 794,000 0 $ 3,446,990 $ Liabilities Common stock Retained earnings (above) Total liabilities and equity (841,600) (400,000) 2,205,390 (3,446,990) $ (128,200) (100,000) (565,800) (794,000) $
