On January 1, 2020, Allen Corporation purchased \(30 \%\) of the 30,000 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 \(\$ 24,000\) and declared and paid dividends of \(\$ 8,000\). As of December 31, 2020, common shares of Towne Corporation were trading at \(\$ 20\) per share.

Required

a. Assume that Allen Corporation had significant influence over Towne Corporation. Prepare the entries for 2020 to record the purchase of the investment, the receipt of declared dividends, and the proportionate share of net income.

b. Assume that Allen Corporation did not have significant influence over Towne Corporation. Record the entries in 2020 to record the purchase of the investment, the receipt of declared dividends, and the fair value adjustment.

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 \((b)\).