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Patrick Corporation acquired 100 percent of OBrien Companys outstanding common stock on January 1 for $639,000 in cash. OBrien reported net assets with a carrying amount of $374,000 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:

Trademarks (indefinite life) Customer relationships (5-year remaining life) Equipment (10-year remaining life) Book Values $ 101,500 0 364,000 Fair Values $ 249,500 91,200 323,800 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. Patrick O'Brien Revenues $(1,305,000) $ (828,000) Cost of goods sold 348,000 382,000 Depreciation expense 82,200 95,400 Amortization expense 32,200 0 Income from O'Brien (336, 380) 0 Net income $(1,178,980) 5 (350,600) Retained earnings 17 $ (882,000) $ (274,000) Net income (1,178,980) (350,600) Dividends declared 160,000 98,000 Retained earningo 12/31 $(1,900,980) $ (526,600) Cash s 208,000 $ 121,000 Receivables 416,000 78,900 Inventory 269,000 139,000 Investment in O'Brien 877,380 0 Trademarks 480,000 64,200 Customer relationships 0 0 Equipment (net) 1,014,000 292,000 Goodwill Total assets $ 3,264,380 $ 695, 100 Liabilities $(963,400) $ (68,500) Common stock (400,000) (100,000) Retained earnings 12/31 (1,900,980) (526,600) Total liabilities and equity $(3,264,380) $ (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 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? Required Required B Determine the totals to be reported for this business combination for the year ending December 31. (Input all amounts as positive values.) Consolidated totals 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 Consolidated Totals $ Accounts Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien Net income 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) $ 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) $ $ 121,000 78,900 139,000 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 0 1,014,000 0 3,264,380 S 64,200 0 292,000 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) $

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