Problem $8-1($LO $1)$ Stock dividend, subsidiary stock sales, equity method. On Additional information is as follows:

a$.$ Net income for Towne Company and Sara Company for $2015$ and $2016$ follows $($income is

assumed to be earned evenly throughout the year$)$:

b$.$ No cash dividends are paid or declared by Towne or Sara during $2015$ and $2016.$

c$.$ Towne Company distributes a $10\%$ stock dividend on December $31,2015.$ Towne stock is

selling at $$25$ per share when the stock dividend is declared.

d$.$ On July $1,2016,$ Towne Company sells $2,750$ shares of stock at $$35$ per share. Wells Cor$-$

poration purchases none of these shares.

e$.$ Sara Company sells $5,000$ shares of stock on July $1,2015,$ at $$25$ per share. Wells Corpora$-$

tion purchases $3,700$ of these shares.

f$.$ On January $1,2016,$ Sara Company purchases $5,000$ shares of its common stock from non$-$

controlling interests at $$20$ per share.

Assume Wells Corporation uses the simple equity method for its investments in subsidiaries.

For $2015$ and $2016,$ record each of the adjustments to the investment accounts. Provide all sup$-$

porting calculations in good form.

January $1,2015,$ Wells Corporation acquires $8,000$ shares of Towne Company stock and

$18,000$ shares of Sara Company stock for $$176,000$ and $$240,000,$ respectively. Each invest$-$

ment is acquired at a price equal to the subsidiary's book value, resulting in no excesses.

Towne Company and Sara Company have the following stockholders' equities immediately

prior to Wells's purchases:

analysis for Towne company only please!