Recording Entries for Equity Investment FV NI and Equity Method On January 1, 2020, Allen Corporation purchased 30 of the 48,000 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 $38,400 and declared and paid dividends of $12,800 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 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 Date Account Name Dr Cr Jan 1, 2020 AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer To record investment purchase 2020 AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer To record receipt of dividends Dec 31, 2020 AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer To record proportionate share of investee's 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 Date Account Name Dr Cr Jan 1, 2020 AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer To record investment purchase 2020 AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer To record receipt of dividends Dec 31, 2020 AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment TSInvestment in AFS SecuritiesFair Value Adjustment AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment Equity SecuritiesFair Value Adjustment Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss OCIUnrealized Gain or Loss IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN A Answer Answer To adjust investment to fair value 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

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Recording Entries for Equity Investment: FV-NI and Equity Method On January 1, 2020, Allen Corporation purchased 30% of the 48,000 outstanding common shares of Towne

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

On January 1, 2020, Allen Corporation purchased 30% of the 48,000 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 $38,400 and declared and paid dividends of $12,800. 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

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.

Date	Account Name	Dr.	Cr.
Jan. 1, 2020	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	To record investment purchase.
2020	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	To record receipt of dividends.
Dec. 31, 2020	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	To record proportionate share of investee's 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.

Date	Account Name	Dr.	Cr.
Jan. 1, 2020	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	To record investment purchase.
2020	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	To record receipt of dividends.
Dec. 31, 2020	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	AnswerCashInterest ReceivableInvestment in TSFair Value Adjustment--TSInvestment in AFS SecuritiesFair Value Adjustment--AFSInvestment in HTM SecuritiesInvestment in StockFair Value Adjustment--Equity SecuritiesFair Value Adjustment--Fair Value OptionAllowance for Credit LossesAccumulated Other Comprehensive IncomeUnrealized Gain or Loss--OCIUnrealized Gain or Loss--IncomeDividend RevenueInterest RevenueInvestment IncomeLoss on ImpairmentRecovery of Loss on ImpairmentLoss on Sale of InvestmentGain on Sale of InvestmentN/A	Answer	Answer
	To adjust investment to fair value.

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).