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Patrick Corporation acquired 100 percent of O'Brien Company's outstanding common stock on January 1 for $639,000 in cash. O'Brien reported net assets with a

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Patrick Corporation acquired 100 percent of O'Brien Company's outstanding common stock on January 1 for $639,000 in cash. O'Brien reported net assets with a carrying amount of $374,000 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) Book Values $ 101,500 Customer relationships (5-year remaining life) Equipment (10-year remaining life) 364,000 0 Fair Values $249,500 91,200 323,800 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 Patrick $ (1,305,000) 348,000 82,200 32,200 (336,380) $ (1,178,980) $ (882,000) (1,178,980) 160,000 O'Brien $ (828,000) 382,000 95,400 0 0 $ (350,600) $ (274,000) (350,600) 98,000 $ (526,600) $ 121,000 78,900 139,000 Retained earnings 12/31 $ (1,900,980) Cash $ 208,000 Receivables 416,000 Inventory 269,000 Customer relationships Investment in O'Brien Trademarks Equipment (net) Goodwill Total assets Liabilities Common stock Retained earnings 12/31 Total liabilities and equity 877,380 0 480,000 64,200 0 0 1,014,000 292,000 0 0 $ 3,264,380 $ 695,100 $ (963,400) (400,000) (1,900,980) $(3,264,380) $ (68,500) (100,000) (526,600) $ (695,100)

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