Patrick Corporation acquired 100 percent of O'Brien Company's outstanding common stock on January 1 for $693,700 in cash. O'Brien reported net assets with a carrying amount of $403,000 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 $ 60,500 Customer relationships (5-year remaining life) Equipment (10-year remaining life) 0 423,000 Fair Values $ 237,500 99,600 363,300 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 $ (1,192,500) 318,000 82,200 O'Brien $ (792,000) 364,000 72,600 26,200 (341,450) $ (1,107,550) $ (746,000) (1,107,550) 161,000 $ (355,400) $ (303,000) (355,400) 99,000 $ (559,400) $ 129,500 Retained earnings 12/31 $ (1,692,550) Inventory Customer relationships Cash Receivables Investment in O'Brien Trademarks Equipment (net) Goodwill Total assets Liabilities Common stock Retained earnings 12/31 Total liabilities and equity $ 232,000 338,000 233,000 81,900 209,000 936,150 0 572,000 73,500 0 0 1,090,000 369,000 0 0 $ 3,401,150 $ 862,900 $ (1,308,600) (400,000) (1,692,550) $(3,401,150) $ (203,500) (100,000) (559,400) $ (862,900)