On January 1, 2013, Plano Company acquired 8 percent (16,400 shares) of the outstanding voting shares of the Sumter Company for $262,400, an amount equal to Sumter?s underlying book and fair value. Sumter declares and pays a cash dividend to its stockholders each year of $102,500 on September 15. Sumter reported net income of $391,000 in 2013, $456,600 in 2014, $505,400 in 2015, and $481,000 in 2016. Each income figure can be assumed to have been earned evenly throughout its respective year. In addition, the fair value of these 16,400 shares was indeterminate, and therefore the investment account remained at cost.

On January 1, 2015, Plano purchased an additional 32 percent (65,600 shares) of Sumter for $1,252,150 in cash and began to use the equity method. This price represented a $58,200 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 (20,500 shares) of Sumter?s outstanding shares for $533,000 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.

Prepare the journal entries for Plano for the years of 2013 through 2016.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

1. Record the cost of 16,400 shares of Sumter Company.

2.Record the annual dividends declared and received from Sumter Company. Because declaration and payment are on same day, a dividend receivable account is unnecessary.

3.Record the annual dividends declared and received from Sumter Company.

4.Record the cost of 65,600 additional shares of Sumter Company.

5.Record the entry to recoginze the retrospective effect of change to equity method.

6.Record the annual dividend declared and received from Sumter.

7.Record the accrued 2015 income based on 40% ownership of Sumter.

8.Record the amortization of $58,200 patent over 15 years.

9.Record the accrued year income of 40% ownership.

10.Record the year amortization of patent to establish correct book value for investment as of 7/1/16.

11.Record the 20,500 shares of Sumter Company sold.

12. Record the annual dividend declared and received.

13.Record the year income based on remaining 30% ownership.

14.Record the year of patent amortization.

(Sample Example Attached)

Problem 1-32 (LO 1-1, 1-2, 1-3, 1-4, 1-5a, 1-5d) On January 1, 2013, Plano Company acquired 8 percent (22,800 shares) of the outstanding voting shares of the Sumter Company for $456,000, an amount equal to Sumter's underlying book and fair value. Sumter declares and pays a cash dividend to its stockholders each year of $142,500 on September 15. Sumter reported net income of $358,000 in 2013, $425,600 in 2014, $470,000 in 2015, and $447,800 in 2016. Each income figure can be assumed to have been earned evenly throughout its respective year. In addition, the fair value of these 22,800 shares was indeterminate, and therefore the investment account remained at cost. On January 1, 2015, Plano purchased an additional 32 percent (91,200 shares) of Sumter for $2,103,350 in cash and began to use the equity method. This price represented a $52,350 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 (28,500 shares) of Sumter's outstanding shares for $855,000 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. Prepare the journal entries for Plano for the years of 2013 through 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole dollar.) _CS-9935 Explanation: 2013 as reported Income (dividends) $ Change in investment balance 2013equity method (as restated) Income (8% of $358,000 reported income) Change in investment balance (equity income less dividends) 2014 as reported Income (dividends) 0 $ 28,640 $ 17,240 $ 11,400 Change in investment balance 2014equity method (as restated) Income (8% of $425,600 reported income) 11,400 0 $ 34,048 Change in investment balance (equity income less dividends) $ 2013 increase in reported income ($28,640 - $11,400) 2014 increase in reported income ($34,048 - $11,400) $ 2013 increase in investment in Sumter balance equity method 2014 increase in investment in Sumter balance equity method Retrospective adjustmentInvestment in Sumter (above) Investment in Sumter 7/1/16 balance Percentage of shares sold (28,500 114,000) Cost of shares sold (rounded) 17,240 22,648 Retrospective adjustmentincome (above) Investment in Sumter and cost of shares sold: 1/1/13 Acquisition 1/1/15 Acquisition 1/1/15 Retrospective adjustment 9/15/15 Dividends 12/31/15 Basic equity accrual 12/31/15 Amortization 7/1/16 Basic equity accrual 7/1/16 Amortization 22,648 $ 39,888 $ 17,240 22,648 $ $ 39,888 456,000 2,103,350 39,888 (57,000) 188,000 (3,490) 89,560 (1,745) $ 2,814,563 25% 703,641 Because 28,500 of 114,000, or , of shares are sold, the percentage retained is of 40% = 30%. Annual patent amortizationoriginal $ computation Percentage of shares retained (85,500 114,000) 3,490 75% Annual patent $ amortizationcurrent 2,617.50 Patent amortization for half year 1,308.75 $