On January 1, 2013, Hiram Corporation acquired all the outstanding stock of Terrier Company, by issuing 9,000 shares of its $30 par value common stock. At the acquisition date, the stock was trading at $50 per share. Additionally, Hiram paid $10,000 to Sandler O'Neal to represent them in the transaction and $10,000 to KPMG for accounting services.

At January 1, 2013, Terrier had retained earnings of $230,000 and total book value of $360,000. Your analysis of Terrier's assets and liabilities revealed that its property, plant and equipment was undervalued by $60,000 and has a remaining useful life of 6 years. Terrier has a trademark that you determined has a fair value of $30,000 with a ten year life.

The following are the separate financial statements for Hiram and Terrier as of December 31, 2013. Prepare a consolidated worksheet for these two companies as of December 31, 2013.

Hiram Terrier Dr Cr Total

Income Statement

Revenue $610,000 $370,000

Expenses 385,000 220,000

Dividend Income 5,000

Net Income $230,000 $150,000

Retained Earnings

Retained Earnings BOY $880,000 $230,000

Net Income 230,000 150,000

Dividends Paid 90,000 5,000

Retained Earnings EOY $1,020,000 $375,000

Balance Sheet

Cash $130,000 $15,000

Receivables 380,000 220,000

Inventory 560,000 280,000

Investment in Sub 450,000

Land 460,000 240,000

Property, Plant and Equipment 920,000 220,000

Total Assets $2,900,000 $975,000

Liabilities 780,000 470,000

Common Stock 800,000 100,000

Paid-In Capital 300,000 30,000

Retained Earnings 12/31/2007 1,020,000 375,000

Total Liabilities and Equity $2,900,000 $975,000

What investment accounting method does Hiram use to account for its investment in Terrier? How do you know?