On July 1, 2020, Allen Corporation purchased 30% of the 12,000 outstanding common shares of Towne...

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On July 1, 2020, Allen Corporation purchased 30% of the 12,000 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 $3.200 on Decermber 30, 2020, to shareholders on record. During the year, Towne Corporation reported net income of $9,600. As of December 31, 2020, common shares of Towne Corporation were trading at $20 per share. a. Record Allen's entries in 2020 assuming that Allen Corporation had significant influence over Towne Corporation. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero) Date Account Name Dr. Cr. Jul, 1, 2020 To record investment purchase. Dec. 30, 2020 To record receiot of cividends. Dec. 31, 2020 To record proportionate share of investee's net income. Dec. 31, 2020 To adjust investment to fair value, b. Indicate the effects of this investment on the 2020 income statement of Allen Corporation and its year-end balance sheet. Note: Use a negative sign to indicate a loss. Income Statement 2020 Other Revenues and Gains Balance Sheet, December 31 2020 Assets On July 1, 2020, Allen Corporation purchased 30% of the 12,000 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 $3.200 on Decermber 30, 2020, to shareholders on record. During the year, Towne Corporation reported net income of $9,600. As of December 31, 2020, common shares of Towne Corporation were trading at $20 per share. a. Record Allen's entries in 2020 assuming that Allen Corporation had significant influence over Towne Corporation. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero) Date Account Name Dr. Cr. Jul, 1, 2020 To record investment purchase. Dec. 30, 2020 To record receiot of cividends. Dec. 31, 2020 To record proportionate share of investee's net income. Dec. 31, 2020 To adjust investment to fair value, b. Indicate the effects of this investment on the 2020 income statement of Allen Corporation and its year-end balance sheet. Note: Use a negative sign to indicate a loss. Income Statement 2020 Other Revenues and Gains Balance Sheet, December 31 2020 Assets

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Solution a S no Account titles Debit Credit 01Jan Investment in Towne Corporation shar... View the full answer