On January 1, 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, common shares of Towne Corporation were trading at $20 per share. Please Indicate the amount of income that would be reported on the income statement and the investment balance on the year-end balance sheet under requirement (a) and requirement (b).
On January 1, 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, common shares of Towne Corporation were trading at $20 per share. Please Indicate the amount of income that would be reported on the income statement and the investment balance on the year-end balance sheet under requirement (a) and requirement (b).
Chapter8: Consolidated Tax Returns
Section: Chapter Questions
Problem 36P
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am. 62.
Transcribed Image Text:On January 1, 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, common shares of Towne Corporation were trading at $20 per share.
Please Indicate the amount of income that would be reported on the income statement and the investment balance on the year-end balance sheet under requirement (a) and
requirement (b).
Transcribed Image Text:a. Investment accounted for under the equity method $
b. Investment measured at FV-NI
Income Investment Net Balance
Dec. 31
0 $
0
0
0
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