On January 1, 2020 Thunder Corporation purchased 28,000 shares of Rain Companys outstanding common stock. Thunder paid $56 per share for the common stock. Thunder made the purchase to ensure that Rains new technology would be available for its products. Rains balance sheet as of the acquisition date is attached.

A valuation consultant was used to determine the fair value of certain of Rains assets and liabilities at the time of the purchase and determined that the following assets and liabilities had fair values different than what appeared on Rains balance sheet:

Fair Value

Accounts receivable (fully collected in 2020) $270,000

Inventory (sold during 2020) 246,000

Equipment (6-year remaining life as of 1/1/20) 825,000

Buildings (20-year remaining life as of 1/1/20) 750,000

Land 900,000

Short-Term Note payable (mature 9/30/2020) 142,000

Note Payable (6%, due in 12/31/28) 655,000

In addition, the valuation consultant determined that Rains patent portfolio had a fair value of $2,200,000 and its brand name had a fair value $600,000. Rains patent portfolio has a remaining useful life of 4 years.

During 2020 Rain paid dividends of $1 per share on 3/30/2020 and 9/30/2020 and recorded net income for the year of $1,934,000. The market value of Rains stock as of 12/31/2020 was $74 per share.

Required:

1. Determine how Thunder should account for its investment in Rain and provide your reasoning.
2. Prepare all journal entries required by Thunder to account for its investment in Rain during 2020. Provide any necessary documentation for journal entries with details.
3. Determine how and at what amounts this investment should be reported in Thunders 2020 financial statements. Provide specific dollar amounts and line items for each financial statement.
4. Assuming Thunder is unable to exert significant influence over Rain determine how and at what amounts this investment should be reported in Thunders 2020 financial statements. Provide specific dollar amounts and line items for each financial statement.