Q6. Patrick Corporation acquired 100 percent of OBrien Companys outstanding common stock on January 1, for $550,000 in cash. OBrien reported net assets with a carrying amount of $350,000 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)	$	60,000	$	160,000
Customer relationships (5-year remaining life)		0		75,000
Equipment (10-year remaining life)		342,000		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. OBrien declared and paid dividends in the same period. Credit balances are indicated by parentheses.

	Patrick				O'Brien
Revenues	$	(1,125,000	)		$	(520,000	)
Cost of goods sold		300,000				228,000
Depreciation expense		75,000				70,000
Amortization expense		25,000				0
Income from O'Brien		(210,000	)			0
Net income	$	(935,000	)		$	(222,000	)
Retained earnings 1/1	$	(700,000	)		$	(250,000	)
Net income		(935,000	)			(222,000	)
Dividends declared		142,000				80,000
Retained earnings 12/31	$	(1,493,000	)		$	(392,000	)
Cash	$	185,000			$	105,000
Receivables		225,000				56,000
Inventory		175,000				135,000
Investment in O'Brien		680,000				0
Trademarks		474,000				60,000
Customer relationships		0				0
Equipment (net)		925,000				272,000
Goodwill		0				0
Total assets	$	2,664,000			$	628,000
Liabilities	$	(771,000	)		$	(136,000	)
Common stock		(400,000	)			(100,000	)
Retained earnings 12/31		(1,493,000	)			(392,000	)
Total liabilities and equity	$	(2,664,000	)		$	(628,000	)

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.

Totals Revenues Cost of goods sold Amortization expense Depreciation expense Income of 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 Goodwill Total assets Liabilities Common stock Retained earnings, 12/31 Total liabilities and equities | $ 2,800,000 Consolidated Totals PATRICK CORPORATION AND CONSOLIDATED SUBSIDIARY O'BRIEN Consolidation Worksheet For Year Ending December 31 Consolidation Entries Accounts Patrick O'Brien Debit Credit Revenues $ (1,125,000) $ (520,000) Cost of goods sold 300,000 228,000 Depreciation expense 75,000 70,000 Amortization expense 25,000 0 Income from O'Brien (210,000) 0 Net income $ (935,000) $ (222,000) Retained earnings, 1/1 Net income (above) Dividends declared Retained earnings, 12/31 (700,000) (935,000) 142,000 (1,493,000) (250,000) (222,000) 80,000 (392,000) $ $ $ $ Cash Receivables Inventory Investment in O'Brien Trademarks Customer relationships Equipment (net) Goodwill Total assets 185,000 225,000 175,000 680,000 474,000 105,000 56,000 135,000 60,000 925,000 272,000 $ 2,664,000 $ 628,000 Liabilities Common stock Retained earnings (above) Total liabilities and equity (771,000) (400,000) (1,493,000) (2,664,000) (136,000) (100,000) (392,000) (628,000) $ $ $