Exercise 4-14 On January 1, 2014, Plenty Company purchased a 70% interest in the common stock of Set Company for $709,600, an amount $18,000 in excess of the book value of equity acquired. The excess relates to the understatement of Set Company's land holdings. Excerpts from both Company's financial statements for the year ended December 31, 2014, follow: 1/1/14 retained earnings Income from independent operations Dividends declared Set Company 185,000 121,000 (49,000 ) Plenty Company 886,000 443,000 (80,000) Set Company's stockholders' equity is composed of common stock and retained earnings only. Both companies file separate tax returns, and the expected tax rate is 40%. The capital gains tax rate is 20%, and there is an 80% dividend exclusion rate. Exercise 4-14 On January 1, 2014, Plenty Company purchased a 70% interest in the common stock of Set Company for $709,600, an amount $18,000 in excess of the book value of equity acquired. The excess relates to the understatement of Set Company's land holdings. Excerpts from both Company's financial statements for the year ended December 31, 2014, follow: 1/1/14 retained earnings Income from independent operations Dividends declared Set Company 185,000 121,000 (49,000 ) Plenty Company 886,000 443,000 (80,000) Set Company's stockholders' equity is composed of common stock and retained earnings only. Both companies file separate tax returns, and the expected tax rate is 40%. The capital gains tax rate is 20%, and there is an 80% dividend exclusion rate