Patrick Corporation acquired 100 percent of OBrien Companys outstanding common stock on January 1, for $715,600 in cash. OBrien reported net assets with a carrying amount of $423,000 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)	$	97,500	$	263,500
Customer relationships (5-year remaining life)		0		94,500
Equipment (10-year remaining life)		395,000		350,600

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

	Patrick				O'Brien
Revenues	$	(1,395,000	)		$	(796,000	)
Cost of goods sold		372,000				366,000
Depreciation expense		75,900				92,400
Amortization expense		43,400				0
Income from O'Brien		(323,140	)			0
Net income	$	(1,226,840	)		$	(337,600	)
Retained earnings 1/1	$	(890,000	)		$	(324,000	)
Net income		(1,226,840	)			(337,600	)
Dividends declared		157,000				95,000
Retained earnings 12/31	$	(1,959,840	)		$	(566,600	)
Cash	$	212,000			$	121,500
Receivables		272,000				71,100
Inventory		200,000				212,000
Investment in O'Brien		944,740				0
Trademarks		542,000				60,000
Customer relationships		0				0
Equipment (net)		1,078,000				363,000
Goodwill		0				0
Total assets	$	3,248,740			$	827,600
Liabilities	$	(888,900	)		$	(161,000	)
Common stock		(400,000	)			(100,000	)
Retained earnings 12/31		(1,959,840	)			(566,600	)
Total liabilities and equity	$	(3,248,740	)		$	(827,600	)

1. Which investment method did Patrick use to compute the $323,140 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 3