Problem 3-28 (LO 3-1, 3-3a) Patrick Corporation acquired 100 percent of O'Brien Company's outstanding common stock on January 1, for $636,200 in cash. O'Brien reported net assets with a carrying amount of $353,000 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 $ 90,500 0 369,000 Fair Values $ 255,500 85,200 320, 100 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. Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien Net income Retained earnings 1/1 Net income Dividends declared Patrick $ (1,702,500) 454,000 101,400 28, 400 (346,050) $ (1,464, 750) $ (804,000) (1,464,750) O'Brien $ (836,000) 386,000 91,800 0 0 $ (358,200) $ (250,000) (358,200) 101,000 163,000 Retained earnings 12/31 $ (2,105,750) $ (507,200) Cash $ 251,000 $ 141,000 Receivables 308,000 63,600 Inventory 205,000 142,000 Investment in O'Brien. 878, 250 0 Trademarks Customer relationships 632,000 79,500 0 0 Equipment (net) Goodwill 1,000,000 338,000 0 0 Liabilities Total assets Common stock Retained earnings 12/31 Total liabilities and equity $ 3,274,250 $ 764, 100 $ (768,500) $ (156,900) (400,000) (2,105,750) (100,000) (507,200) $ (3,274,250) $ (764, 100) a. Which investment method did Patrick use to compute the $346,050 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.