1. Which investment method did Patrick use to compute the $210,000 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.

Patrick Corporation acquired 100 percent of O'Brien Company's outstanding common stock on January 1, for $550,000 in cash O'Brien reported net assets with a carrying amount of $350,000 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 Book Values Fair Values Trademarks (indefinite life) Customer relationships (5-year remaining life) Equipment (10-year remaining life) $60,000 $160,000 75,000 312,000 0 342,000 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. O'Brien declared and paid dividends in the same period. Credit balances are indicated by parentheses Patrick O'Brien $(1,125,000)(520,000) Revenues Cost of goods sold Depreciation expense Amortization expense Income from O'Brien 228,000 70,000 0 0 300,000e 75,000 25,000 210,000 $ (935,000) $ (700,000) (935,000) Net income $ (222,000) Retained earnings 1/1 Net income Dividends declared $ (250,000) (222,000) 80,000 $ (392,000) 142,000800_ Retained earnings 12/31 $(1,493,000) $185,000 225,000 175,000e as Receivables Inventory Investment in O'Brien Trademarks Custamer relationships Equipment (net) Goodwil1 $105,000 56,000 135,000 0 60,000 0 272,000e 0 680,000 474,00c 0 925,000 0 $ 2,664,000 $ (771,000) (400,000) Total assets $628,000 Liabilities Common stock Retained earnings 12/31 $(136,000) (100,000) (1,493,000)(392,000) $ (628,000) Total liabilities and equity $(2,664,000) a. Which investment method did Patrick use to compute the $210,000 income from O'Brien