Recording Entries for Equity Investment: FV-NI and Equity MethodOn January 1, 2020, Allen Corporation purchased 30% of the 66,000 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. During the year, Towne Corporation reported net income of $52,800 and declared and paid dividends of $17,600. As of December 31, 2020, common shares of Towne Corporation were trading at $20 per share.Journal Entries with Significant InfluenceJournal Entries without Significant InfluenceFinancial Statement Presentationc. Indicate the amount of income that would be reported on the 2020 income statement and the investment balance on the 2020 year-end balance sheet under requirement (a) and requirement (b). IncomeInvestment Net Balance 2020Dec. 31, 2020a. Investment accounted for under the equity methodAnswer Answer b. Investment measured at FV-NIAnswer Answer

It is the method used to ascertain the value of a company's investment in another company when it…

Answered: On January 1, 2020, Allen Corporation…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Recording Entries for Equity Investment: FV-NI and Equity Method

On January 1, 2020, Allen Corporation purchased 30% of the 66,000 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. During the year, Towne Corporation reported net income of $52,800 and declared and paid dividends of $17,600. As of December 31, 2020, common shares of Towne Corporation were trading at $20 per share.

Journal Entries with Significant Influence
Journal Entries without Significant Influence
Financial Statement Presentation

c. Indicate the amount of income that would be reported on the 2020 income statement and the investment balance on the 2020 year-end balance sheet under requirement (a) and requirement (b).

	Income	Investment Net Balance
	2020	Dec. 31, 2020
a. Investment accounted for under the equity method	Answer	Answer
b. Investment measured at FV-NI	Answer	Answer

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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