Patrick Corporation acquired 100 percent of OBrien Companys outstanding common stock on January 1 for $700,400 in cash. OBrien reported net assets with a carrying amount of $440,000 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

Book Values Fair Values Trademarks (indefinite life) $ 94,500 $ 238,500

Customer relationships (5-year remaining life) 0 75,000

Equipment (10-year remaining life) 352,000 310,300

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 $ (1,725,000 ) $ (676,000 )

Cost of goods sold 460,000 306,000

Depreciation expense 104,400 72,600

Amortization expense 34,800 0

Income from O'Brien (286,570 ) 0

Net income $ (1,412,370 ) $ (297,400 )

Retained earnings 1/1 $ (796,000 ) $ (340,000 )

Net income (1,412,370 ) (297,400 )

Dividends declared 167,000 105,000

Retained earnings 12/31 $ (2,041,370 ) $ (532,400 )

Cash $ 203,000 $ 154,500

Receivables 294,000 74,700

Inventory 181,000 205,000

Investment in O'Brien 881,970 0

Trademarks 516,000 69,900

Customer relationships 0 0

Equipment (net) 932,000 324,000

Goodwill 0 0

Total assets $ 3,007,970 $ 828,100

Liabilities $ (566,600 ) $ (195,700 )

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

Retained earnings 12/31 (2,041,370 ) (532,400 )

Total liabilities and equity $ (3,007,970 ) $ (828,100 )

Which investment method did Patrick use to compute the $286,570 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 OBrien for the year ending December 31