I got the first two parts, but could you explain to me how to find part C? Recording Entries for Equity Investment: FV-NI and Equity MethodOn January 1, 2020, Allen Corporation purchased 30% of the 75,000 outstanding common shares of Towne Corporation at $17 per share as a long-terminvestment. On the date of purchase, the book value and the fair value of the net assets of Towne Corporation were equal. During the year, TowneCorporation reported net income of $60,000 and declared and paid dividends of $20,000. As of December 31, 2020, common shares of TowneCorporation were trading at $20 per share.Journal Entries with Significant InfluenceJournal Entries without Significant InfluenceFinancial Statement Presentationa. Assume that Allen Corporation had significant influence over Towne Corporation. Prepare the entries for 2020 to record the purchase of theinvestment, the receipt of declared dividends, and the proportionate share of net income.DateAccount NameDr.Cr.Jan. 1, 2020Investment in Stock382,500Cash382,500To record investment purchase.2020Cash6,000Investment in Stock6,000To record receipt of dividends.Dec. 31, 2020 Investment in Stock18,000Investment Income18,000To record proportionate share of investee's net income.Check> b. Assume that Allen Corporation did not have significant influence over Towne Corporation. Record the entries in 2020 to record the purchase of theinvestment, the receipt of declared dividends, and the fair value adjustment.DateAccount NameDr.Cr.Jan. 1, 2020Investment in Stock382,500Cash382,500To record investment purchase.2020Cash6,000Dividend Revenue6,000To record receipt of dividends.Dec. 31, 2020 Fair Value Adjustment--Equity Securities67,500Unrealized Gain or Loss--Income67,500To adjust investment to fair value.Checkc. Indicate the amount of income that would be reported on the 2020 income statement and the investment balance on the 2020 year-end balance sheetunder requirement (a) and requirement (b).IncomeInvestment Net Balance2020Dec. 31, 2020a. Investment accounted for under the equity method $18,000406,500 xb. Investment measured at FV-NI18,000 x67,500 xCheck

Step 1 Dividend is the return over the investment not the income so it doesn’t affect the valuation…

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: under requirement (a) and requirement (b). Income Investment Net Balance 2020 Dec. 31, 2020 a. Investment accounted for under the equity method $ 18,000 v $ 406,500 x b. Investment measured at FV-NI 18,000 x 67,500 x Check

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: under requirement (a) and requirement (b). Income Investment Net Balance 2020 Dec. 31, 2020 a. Investment accounted for under the equity method $ 18,000 v $ 406,500 x b. Investment measured at FV-NI 18,000 x 67,500 x Check

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 17P

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