Patrick Corporation acquired 100 percent of OBrien Companys outstanding common stock on January 1 for $622,100 in cash. OBrien reported net assets with a carrying amount of $381,000 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)	$	89,500	$	220,500
Customer relationships (5-year remaining life)		0		80,100
Equipment (10-year remaining life)		396,000		348,900

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	$	(1,822,500	)		$	(740,000	)
Cost of goods sold		486,000				338,000
Depreciation expense		96,600				87,000
Amortization expense		27,800				0
Income from O'Brien		(303,690	)			0
Net income	$	(1,515,790	)		$	(315,000	)
Retained earnings 1/1	$	(728,000	)		$	(281,000	)
Net income		(1,515,790	)			(315,000	)
Dividends declared		147,000				85,000
Retained earnings 12/31	$	(2,096,790	)		$	(511,000	)
Cash	$	236,000			$	139,500
Receivables		374,000				63,900
Inventory		211,000				139,000
Investment in O'Brien		840,790				0
Trademarks		610,000				66,000
Customer relationships		0				0
Equipment (net)		1,042,000				291,000
Goodwill		0				0
Total assets	$	3,313,790			$	699,400
Liabilities	$	(817,000	)		$	(88,400	)
Common stock		(400,000	)			(100,000	)
Retained earnings 12/31		(2,096,790	)			(511,000	)
Total liabilities and equity	$	(3,313,790	)		$	(699,400	)

1. Which investment method did Patrick use to compute the $303,690 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.