Patrick Corporation acquired $100$ percent of O$$Brien Company$$s outstanding common stock on January $1$ for $$685,000$ in cash. O$$Brien reported net assets with a carrying amount of $$371,000$ at that time. Some of O$$Brien$$s assets either were unrecorded $($having been internally developed$)$ or had fair values that differed from book values as follows:

Book

Values Fair

Values

Trademarks $($indefinite life$)$ $ $80,000$ $ $247,000$

Customer relationships $(5-$year remaining life$)0100,800$

Equipment $(10-$year remaining life$)399,000364,800$

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 $ $(1,627,500)$ $ $(608,000)$

Cost of goods sold $434,000272,000$

Depreciation expense $87,00073,800$

Amortization expense $29,6000$

Income from O'Brien $(245,460)0$

Net income $ $(1,322,360)$ $ $(262,200)$

Retained earnings $1/1$ $ $(804,000)$ $ $(271,000)$

Net income $(1,322,360)(262,200)$

Dividends declared $151,00089,000$

Retained earnings $12/31$ $ $(1,975,360)$ $ $(444,200)$

Cash $ $223,000$ $ $123,500$

Receivables $328,00058,200$

Inventory $209,000168,000$

Investment in O'Brien $841,4600$

Trademarks $550,00066,900$

Customer relationships $00$

Equipment $($net$)950,000275,000$

Goodwill $00$

Total assets $ $3,101,460$ $ $691,600$

Liabilities $ $(726,100)$ $ $(147,400)$

Common stock $(400,000)(100,000)$

Retained earnings $12/31(1,975,360)(444,200)$

Total liabilities and equity $ $(3,101,460)$ $ $(691,600)$

Which investment method did Patrick use to compute the $$245,460$ income from O'Brien?

Determine the totals to be reported for this business combination for the year ending December $31.$

Verify the totals determined in part $($b$)$ by producing a consolidation worksheet for Patrick and O$$Brien for the year ending December $31.$