Patrick Corporation acquired 100 percent of OBrien Companys outstanding common stock on January 1 for $593,600 in cash. OBrien reported net assets with a carrying amount of $373,000 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)	$	79,000	$	191,000
Customer relationships (5-year remaining life)		0		96,000
Equipment (10-year remaining life)		361,000		318,100

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. OBrien declared and paid dividends in the same period. Credit balances are indicated by parentheses.

	Patrick				O'Brien
Revenues	$	(1,605,000)			$	(692,000)
Cost of goods sold		428,000				314,000
Depreciation expense		100,200				78,000
Amortization expense		40,600				0
Income from O'Brien		(285,090)				0
Net income	$	(1,321,290)			$	(300,000)
Retained earnings 1/1	$	(802,000)			$	(273,000)
Net income		(1,321,290)				(300,000)
Dividends declared		162,000				100,000
Retained earnings 12/31	$	(1,961,290)			$	(473,000)
Cash	$	204,000			$	143,000
Receivables		254,000				79,500
Inventory		236,000				163,000
Investment in O'Brien		778,690				0
Trademarks		660,000				62,700
Customer relationships		0				0
Equipment (net)		934,000				272,000
Goodwill		0				0
Total assets	$	3,066,690			$	720,200
Liabilities	$	(705,400)			$	(147,200)
Common stock		(400,000)				(100,000)
Retained earnings 12/31		(1,961,290)				(473,000)
Total liabilities and equity	$	(3,066,690)			$	(720,200)

1. Which investment method did Patrick use to compute the $285,090 income from O'Brien?

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

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