Patrick Corporation acquired 100 percent of OBrien Companys outstanding common stock on January 1 for $700,400 in cash. OBrien reported net assets with a carrying amount of $440,000 at that time. Some of OBriens assets either were unrecorded (having been internally developed) or had fair values that differed from book values as follows:

	Book Values		Fair Values
Trademarks (indefinite life)	$	94,500	$	238,500
Customer relationships (5-year remaining life)		0		75,000
Equipment (10-year remaining life)		352,000		310,300

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. OBrien declared and paid dividends in the same period. Credit balances are indicated by parentheses.

	Patrick				O'Brien
Revenues	$	(1,725,000	)		$	(676,000	)
Cost of goods sold		460,000				306,000
Depreciation expense		104,400				72,600
Amortization expense		34,800				0
Income from O'Brien		(286,570	)			0
Net income	$	(1,412,370	)		$	(297,400	)
Retained earnings 1/1	$	(796,000	)		$	(340,000	)
Net income		(1,412,370	)			(297,400	)
Dividends declared		167,000				105,000
Retained earnings 12/31	$	(2,041,370	)		$	(532,400	)
Cash	$	203,000			$	154,500
Receivables		294,000				74,700
Inventory		181,000				205,000
Investment in O'Brien		881,970				0
Trademarks		516,000				69,900
Customer relationships		0				0
Equipment (net)		932,000				324,000
Goodwill		0				0
Total assets	$	3,007,970			$	828,100
Liabilities	$	(566,600	)		$	(195,700	)
Common stock		(400,000	)			(100,000	)
Retained earnings 12/31		(2,041,370	)			(532,400	)
Total liabilities and equity	$	(3,007,970	)		$	(828,100	)

Which investment method did Patrick use to compute the $286,570 income from O'Brien?

Equity method- I answered this one.

1. Determine the totals to be reported for this business combination for the year ending December 31.

2. Verify the totals determined in part (b) by producing a consolidation worksheet for Patrick and OBrien for the year ending December 31.

1;

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 OBrien
Trademarks
Customer relationships
Equipment (net)
Goodwill
Total assets
Liabilities
Common stock
Retained earnings, 12/31
Total liabilities and equities

• 2.

• PATRICK CORPORATION AND CONSOLIDATED SUBSIDIARY O'BRIEN
  Consolidation Worksheet
  For Year Ending December 31
  			Consolidation Entries		Consolidated
  Accounts	Patrick	OBrien	Debit	Credit	Totals
  Revenues	$(1,725,000)	$(676,000)
  Cost of goods sold	460,000	306,000
  Depreciation expense	104,400	72,600
  Amortization expense	34,800	0
  Income from OBrien	(286,570)	0
  Net income	$(1,412,370)	$(297,400)
  Retained earnings, 1/1	(796,000)	(340,000)
  Net income (above)	(1,412,370)	(297,400)
  Dividends declared	167,000	105,000
  Retained earnings, 12/31	$(2,041,370)	$(532,400)
  Cash	$203,000	$154,500
  Receivables	294,000	74,700
  Inventory	181,000	205,000
  Investment in OBrien	881,970
  Trademarks	516,000	69,900
  Customer relationships	0	0
  Equipment (net)	932,000	324,000
  Goodwill	0	0
  Total assets	$3,007,970	$828,100
  Liabilities	(566,600)	(195,700)
  Common stock	(400,000)	(100,000)
  Retained earnings (above)	2,041,370	(532,400)
  Total liabilities and equity	$(3,007,970)	$(828,100)	$0	$0

• If you could please show as much work as possible, on how you arrived at the answers. Thank you.