undefined

Presenting Investment Revenue on the Statement of Cash Flows On January 1, 2020, Allen Corporation purchased 30% of the 18,000 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 $14,400 and declared and paid dividends of $4,800. 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. Record the entries for 2020 for Allen Corporation. Date Account Name Cr. Jan 1, 2020 Dr. (To record investment purchase) Dec 31, 2020 (To record investment income) Dec 31, 2020 (To record receipt of dividends) b. Indicate how the investment transactions would affect the statement of cash flows for 2020, assuming that the company uses the indirect method in reporting cash flows from operating activities. Note: Indicate a subtraction in the statement of cash flows with a negative sign in the Amount column. Note: If an item is not included in the statement of cash flows, enter zero (leave blank) in the Amount column, and enter "N/A" in the Cash Flow Section column. Cash Flow Section Item Amount Excess of investment income over dividends received $ Purchase of investment in stock Check