Problem 3-28 (Algo) (LO 3-1, 3-3a) 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: Book Values $ 101,500 Trademarks (indefinite life) Customer relationships (5-year remaining life) Equipment (10-year remaining life) Fair Values $ 249,500 91,200 323,800 364,000 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. O'Brien $ (828,000) 382,000 95,400 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) Goodwili Total assets Liabilities Common stock Retained earnings 12/31 Total liabilities and equity Patrick $(1,305,000) 348,000 82,200 32,200 (336, 380 $(1,178,980) $ (882,000) (1,178,980) 160,000 $(1,900,980) 208,000 416,000 269,000 877,380 480,000 0 1,014,000 $ (350,600) $ (274,000) (350,600) 98,000 $ (526,600) $ 121,000 78,900 139,000 64,200 292,000 $ 3,264,380 $ (963,400) (400,000) (1,900,980) $(3,264,380) $ 695, 100 $ (68,500) (100,000) (526,600) $ (695,100) a. Which investment method did Patrick use to compute the $336,380 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. Complete this question by entering your answers in the tabs below. Required A Required B Required C Which investment method did Patrick use to compute the $336,380 income from O'Brien? Which investment method did Patrick use to compute the $336,380 income from O'Brien? Equity method 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.) Book rint Consolidated totals $ 2,133,000 $ 730.000 $ 97,440 $ 97,440 336,380 . rences 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 O'Brien Trademarks Customer relationships Equipment (net) Goodwill Total assets Liabilities Common stock Retained earnings, 12/31 Total liabilities and equities 5 5 Consolidated Totals oints Accounts Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien Net income PATRICK CORPORATION AND CONSOLIDATED SUBSIDIARY O'BRIEN Consolidation Worksheet For Year Ending December 31 Consolidation Entries Patrick O'Brien Debit Credit $ (1,305,000) $ (828,000) 348,000 382,000 82,200 95,400 32,200 0 (336,380) 0 $ (1,178,980) $ (350,600) eBook Print References Retained earnings, 1/1 Net income (above) Dividends declared Retained earnings, 12/31 (882,000) (1,178,980) 160,000 (1,900,980) $ (274,000) (350,600) 98,000 (526,600) $ $ Cash Receivables Inventory Investment in O'Brien Trademarks Customer relationships Equipment (net) Goodwill Total assets 208,000 $ 416,000 269,000 877,380 480,000 121,000 78,900 139,000 64,200 0 292,000 1,014,000 0 3,264,380 $ 0 $ 695,100 Liabilities Common stock Retained earnings (above) Total liabilities and equity (963,400) (400,000) 1,900,980 (3,264,380) $ (68,500) (100,000) (526,600) (695,100) $ $ 0 $ 0 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.) Book rint Consolidated totals $ 2,133,000 $ 730.000 $ 97,440 $ 97,440 336,380 . rences 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 O'Brien Trademarks Customer relationships Equipment (net) Goodwill Total assets Liabilities Common stock Retained earnings, 12/31 Total liabilities and equities 5 5 Consolidated Totals oints Accounts Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien Net income PATRICK CORPORATION AND CONSOLIDATED SUBSIDIARY O'BRIEN Consolidation Worksheet For Year Ending December 31 Consolidation Entries Patrick O'Brien Debit Credit $ (1,305,000) $ (828,000) 348,000 382,000 82,200 95,400 32,200 0 (336,380) 0 $ (1,178,980) $ (350,600) eBook Print References Retained earnings, 1/1 Net income (above) Dividends declared Retained earnings, 12/31 (882,000) (1,178,980) 160,000 (1,900,980) $ (274,000) (350,600) 98,000 (526,600) $ $ Cash Receivables Inventory Investment in O'Brien Trademarks Customer relationships Equipment (net) Goodwill Total assets 208,000 $ 416,000 269,000 877,380 480,000 121,000 78,900 139,000 64,200 0 292,000 1,014,000 0 3,264,380 $ 0 $ 695,100 Liabilities Common stock Retained earnings (above) Total liabilities and equity (963,400) (400,000) 1,900,980 (3,264,380) $ (68,500) (100,000) (526,600) (695,100) $ $ 0 $ 0