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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
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: Trademarks (indefinite life) Customer relationships (5-year remaining life) Equipment (10-year remaining life) Book Fair Values Values $ 86,500 $ 215,500 0 92,400 347,000 305,300 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 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 $(1,867,500) 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 0 1,078,000 0 $ 3,446,990 $ (841,600) (400,000) (2,205, 390) $(3,446,990) 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 0 65,400 0 292,000 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. Answer is not complete. 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.) Revenues Cost of goods sold Amortization expense Depreciation expense Income from O'Brien Net income Consolidated totals $ (2,763,500) X $ 914,000 $ 55,880 $ 180,570 0 Retained earnings, 1/1 Dividends declared Retained earnings, 12/31 Cash Receivables $ (1,613,050) X $ (736,000) X $ 152,000 $ (2,771,190) X $ 352,500 $ 505,100 $ 439,000 0 Inventory Investment in O'Brien Trademarks Customer relationships Equipment (net) Goodwill Total assets $ 792,400 $ 73,920 $ 1,332,470 $ $ 79,800 $ 3,575,190 $ (969,800) X $ (400,000) $ (2,205,390) X $ (3,575,190) Liabilities Common stock Retained earnings, 12/31 Total liabilities and equities 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.) Show less A: Accounts Revenues PATRICK CORPORATION AND CONSOLIDATED SUBSIDIARY O'BRIEN Consolidation Worksheet For Year Ending December 31 Consolidation Entries Consolidated Patrick O'Brien Debit Credit Totals $ (1,867,500) $ (896,000) $ (2,763,500) 498.000 416,000 914,000 88,200 88,200 (4,170) X 180,570 X 37,400 0 18,480 55,880 (377,490) 0 377,490 0 $ (1,621,390) $ (391,800) $ (1,613,050) Cost of goods sold Depreciation expense Amortization expense Income from O'Brien Net income 264,000 Retained earnings, 1/1 Net income (above) Dividends declared Retained earnings, 12/31 (736,000) (1,621,390) 152,000 (264,000) (391,800) 90,000 (736,000) (1,613,050) 152,000 90,000 $ (2,205,390) $ (565,800) $ (2,771,190) X Cash $ 222,000 $ 130,500 $ Receivables 422,000 83,100 352,500 505,100 439,000 223,000 90,000 1,000,990 0 65,400 129,000 Inventory Investment in O'Brien Trademarks Customer relationships Equipment (net) Goodwill 216,000 910,990 598,000 0 1,078,000 0 0 92,400 4,170 79,800 18,480 41,700 292,000 792,400 73,920 1,332,470 79,800 3,575,190 0 794,000 Total assets $ 3,446,990 $ $ (969,800) (400,000) 100,000 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) (2,771,190) $ $ 1,155,340 $ 1,147,000
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