On January 1, 2020, Rae Company purchased 8,000 of the 40,000 shares outstanding of common stock (par
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On January 1, 2020, Rae Company purchased 8,000 of the 40,000 shares outstanding of common stock (par $1) of Sundem Corporation for $80,000 cash. Assume that the fair value and book value of all net assets of Sundem were the same at that time. This is the only long-term equity investment held and the ownership of Sundem shares represents a significant interest. The accounting periods for both Rae and Sundem end on December 31.
| Sundem Corporation Year 2020 | |
|---|---|
| Income reported for 2020 | $40,000 |
| Cash dividend per share declared and paid on December 15, 2020 | $1.50 |
| Market price per share of stock, December 31, 2020 | $12.00 |
| Year 2021 | |
|---|---|
| Income reported for 2021 | $50,000 |
| Cash dividend per share declared and paid on December 15, 2021 | $1.50 |
| Market price per share of stock, December 31, 2021 | $11.00 |
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