Patrick Corporation acquired 100 percent of OBrien Companys outstanding common stock on January 1 for $651,800 in cash. OBrien reported net assets with a carrying amount of $359,000 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)	$	79,500	$	271,500
Customer relationships (5-year remaining life)		0		92,700
Equipment (10-year remaining life)		368,000		318,200

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	$	(1,500,000	)		$	(784,000	)
Cost of goods sold		400,000				360,000
Depreciation expense		80,400				70,500
Amortization expense		28,800				0
Income from O'Brien		(339,940	)			0
Net income	$	(1,330,740	)		$	(353,500	)
Retained earnings 1/1	$	(886,000	)		$	(259,000	)
Net income		(1,330,740	)			(353,500	)
Dividends declared		148,000				86,000
Retained earnings 12/31	$	(2,068,740	)		$	(526,500	)
Cash	$	237,000			$	151,000
Receivables		370,000				71,700
Inventory		261,000				203,000
Investment in O'Brien		905,740				0
Trademarks		618,000				75,300
Customer relationships		0				0
Equipment (net)		1,026,000				332,000
Goodwill		0				0
Total assets	$	3,417,740			$	833,000
Liabilities	$	(949,000	)		$	(206,500	)
Common stock		(400,000	)			(100,000	)
Retained earnings 12/31		(2,068,740	)			(526,500	)
Total liabilities and equity	$	(3,417,740	)		$	(833,000	)

1. Which investment method did Patrick use to compute the $339,940 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.