On January 1, 2013, Plano Company acquired 8 percent (18,400 shares) of the outstanding voting shares of the Sumter Company for $312,800, an amount equal to Sumter's underlying book and fair value.
On January 1, 2015, Plano purchased an additional 32 percent (73,600 shares) of Sumter for $1,477,750 in cash and began to use the equity method. This price represented a $59,400 payment in excess of the book value of Sumter's underlying net assets. Plano was willing to make this extra payment because of a recently developed patent held by Sumter with a 15-year remaining life. All other assets were considered appropriately valued on Sumter's books.
On July 1, 2016, Plano sold 10 percent (23,000 shares) of Sumter's outstanding shares for $621,000 in cash. Although it sold this interest, Plano maintained the ability to significantly influence Sumter's decision-making process. Assume that Plano uses a weighted average costing system.
Sumter declares and pays a cash dividend to its stockholders each year of $115,000 on September 15.
Sumter reported the following net incomes in 2013, 2014, 2015, and 2016:
Year Net Income
2013 $369,000
2014 443,800
2015 502,600
2016 473,200