Patrick Corporation acquired 100 percent of OBrien Companys outstanding common stock on January 1, for $550,000 in

Question:

Patrick acquired 100 percent of O€™Brien Company€™s outstanding on January 1, for $550,000 in cash. O€™Brien reported net assets with a carrying value 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:

Patrick Corporation acquired 100 percent of O€™Brien Company€™s outstanding common

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. Credit balances are indicated by parentheses.

a. Show how Patrick computed the $210,000 Income of O€™Brien balance. Discuss how you determined which accounting method Patrick uses for its investment in O€™Brien.
b. Without preparing a worksheet or consolidation entries, determine and explain 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 December31.

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...