Business, 18.06.2020 01:57 felipa11

On July 1, 2020, Allen Corporation purchased 30% of the 78,000 outstanding common shares of Towne Corporation at $17 per share as a long-term investment. On the date of purchase, the book value and the fair value of the net assets of Towne Corporation were equal. Towne Corporation paid cash dividends of $20,800 on December 30, 2020, to shareholders on record. During the year, Towne Corporation reported net income of $62,400. As of December 31, 2020, common shares of Towne Corporation were trading at $20 per share. A. Record the entries in 2020 assuming that Allen Corporation had significant influence over Towne Corporation.
Date Account Name Dr. Cr.
Jan. 1, 2020 To record investment purchase.
Dec 30, 2020 To record receipt of dividends.
Dec 31, 2020 To record proportionate share of investee's net income.
B. Indicate the effects of this investment on the 2020 income statement and year-end balance sheet.
Income Statement 2020
Other Revenues and Gains
Balance Sheet, December 31 2020
Assets

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On July 1, 2020, Allen Corporation purchased 30% of the 78,000 outstanding common shares of Towne Co...

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