Patrick Corporation acquired 100 percent of O'Brien Company's outstanding common stock on January 1, for $550,000 in cash. O'Brien reported net assets with a carrying amount of $350,000 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 Values $ 60,000 0 342,000 Fair Values $ 160,000 75,000 312,000 Any goodwill is considered to have an indefinite life with no impairment charges during the year. 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 O'Brien $ (520,000) 228,000 70,000 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 Patrick $(1,125,000) 300,000 75,000 25,000 (210,000) $ (935, 000) $ (700,000) (935,000) 142,000 $(1,493,000) 185,000 225,000 175,000 680,000 474,000 $ (222,000) $ (250,000) (222,000) 80,000 $ (392,000) $ 105,000 56,000 135,000 60,000 925,000 272,000 $ 2,664,000 $ 628,000 O'Brien $ (520,000) 228,000 70,000 $ (222,000) $ (250,000) (222,000) Patrick $(1,125,000) 300,000 75,000 25,000 (210,000) $ (935,000) $ (700,000) (935,000) 142,000 $(1,493,000) 185,000 225,000 175,000 680,000 474,000 0 925,000 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 80,000 $ (392,000) $ 105,000 56,000 135,000 60,000 272,000 0 0 $ 2,664,000 $ (771,000) (400,000) (1,493, 000) $ (2,664,000) $ 628,000 $ (136,000) (100,000) (392,000) $ (628,000) a. Which investment method did Patrick use to compute the $210,000 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. Patrick Corporation acquired 100 percent of O'Brien Company's outstanding common stock on January 1, for $550,000 in cash. O'Brien reported net assets with a carrying amount of $350,000 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 Values $ 60,000 0 342,000 Fair Values $ 160,000 75,000 312,000 Any goodwill is considered to have an indefinite life with no impairment charges during the year. 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 O'Brien $ (520,000) 228,000 70,000 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 Patrick $(1,125,000) 300,000 75,000 25,000 (210,000) $ (935, 000) $ (700,000) (935,000) 142,000 $(1,493,000) 185,000 225,000 175,000 680,000 474,000 $ (222,000) $ (250,000) (222,000) 80,000 $ (392,000) $ 105,000 56,000 135,000 60,000 925,000 272,000 $ 2,664,000 $ 628,000 O'Brien $ (520,000) 228,000 70,000 $ (222,000) $ (250,000) (222,000) Patrick $(1,125,000) 300,000 75,000 25,000 (210,000) $ (935,000) $ (700,000) (935,000) 142,000 $(1,493,000) 185,000 225,000 175,000 680,000 474,000 0 925,000 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 80,000 $ (392,000) $ 105,000 56,000 135,000 60,000 272,000 0 0 $ 2,664,000 $ (771,000) (400,000) (1,493, 000) $ (2,664,000) $ 628,000 $ (136,000) (100,000) (392,000) $ (628,000) a. Which investment method did Patrick use to compute the $210,000 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