Patrick Corporation acquired 100 percent of O'Brien Company's outstanding common stock on January 1 for $660,100 in cash. O'Brien reported net assets with a carrying amount of $420,000 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: Trademarks (indefinite life) Customer relationships (5-year remaining life) Equipment (10-year remaining life) Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien Book Values $ 78,000 0 M-L 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 $(1,177,500) 314,000 84,000 34,800 (260,890) 420,000 $/100 5001 Fair Values $ 214,000 80,700 371,700 O'Brien $ (652,000) 294,000 85,800 1377 0 0 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. Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien Net income Retained earnings 1/1 Net income Dividends declared Cash Retained earnings 12/31 Receivables Inventory Investment in O'Brien Trademarks Customer relationships Equipment (net) Goodwill Total assets Liabilities Patrick $(1,177,500) 314,000 84,000 34,800 (260,890) $(1,005,590) $ (840,000) (1,005,590) 149,000 $(1,696,590) $ 269,000 398,000 236,000 833,990 548,000 0 968,000 0 $3,252,990 $(1,156,400) O'Brien $ (652,000) 294,000 85,800 0 0 $ (272,200) $ (320,000) (272, 200) 87,000 (505,200) $ $ 125,000 72,600 190,000 0 83,400 0 314,000 0 $ 785,000 $ (179,800) Common stock Retained earnings 12/31 Total liabilities and equity (400,000) (1,696,590) $ (3,252,990) (100,000) (505,200) $ (785,000) a. Which investment method did Patrick use to compute the $260,890 income from O'Brien? b. Determine the totals to be reported for this business combination for the year ending December 31. c. Verify the totals determined in part (b) by producing a consolidation worksheet for Patrick and O'Brien for the year ending December 31.