Question

please solve(question first picture and second picture is what you have to answer)

Problem 17-08 Riverbed Corp. is a medium-sized corporation specializing in quarrying stone for building construction. The company has long dominated the market, at one time achieving a 70% market penetration During prosperous years, the company's profits, coupled with a conservative dividend policy, resulted in funds available for outside investment. Over the years, Riverbed has had a policy of investing idie cash in equity securities. In particular, Riverbed has made periodic vestments in the company's principal supplier, Norton Industries. Although the firm currently owns 12% of the outstanding common stock of Norton Industries, Riverbed does not have significant influence over the operations of Norton Industries Cheryl Thomas has recently joined Riverbed as assistant controller, and her first assignment is to prepare the 2020 year-end adjusting entries for the accounts that are valued by the "fair value rule for financial reporting purposes. Thomas has gathered the following information about Riverbed' pertinent accounts 1. Riverbed has equity securities related to Delaney Motors and Patrick Electric. During 2020, Riverbed purchased 110,000 shares of Delaney Motors for $1,350,000, these shares currently have a fair value of $1,574,000. Riverbed'investment in Patrick Electric has not been profitables the company acquired 47,000 shares of Patrick in April 2020 at $21 per share, a purchase that currently has a value of $725,000. Prior to 2020, Riverbed invested $22,365,000 in Norton Industries and has not changed its holdings this year. This investment in Norton Industries was valued at $21,538,000 on December 31, 2019. Riverbed 12% ownership of Norton Industries has a current fair value of $22,192,000 on December 2020 2.

Answer 1

A) 1. Investment In Trading Securities

Sl. No	Account Title and Explanation	Debit	Credit
1	Unrealized Holding Gain or Loss Income	$ 38,000
	Fair Value Adjustment ( Trading)		$ 38,000

2. Investment In Avilable for Sale Securities;

Sl. No	Account Title and Explanation	Debit	Credit
1	Fair Value Adjustment ( Available for Sale) (Unrealized Holding Gain or Loss)	$ 654,000
	Equity		$ 654,000

Computation;

Security	Cost	Fair Value	Unrealized Gain/Loss
Delaney Motors	$1,350,000	$1,574,000	$224,000
Patric Electric	$987,000	$725,000	($262,000)
Total Portolio	$2,337,000	$2,299,000	($38,000)

2. Computation of Unrealized Gain or Loss

Security	Cost	Fair Value	Unrealized Gain ( Loss)
Norton Ind	$22,365,000	$21,538,000	($827,000)

Computation of Unrealized Gain or Loss in 2020

Security	Cost	Fair Value	Unrealized Gain ( Loss)
Norton Ind	$22,365,000	$22,192,000	($173,000)
Previous Fair Value Adjestment (Cr.)			$827,000
Fair Value Adjestment (Dr.)			$654,000

B)

Sl.No	Account Title and Explanation	Debit	Credit
1	Equity Investment (Norton Industries )	$ 126,000
	Investment Revenue		$126,000
	($504,000 * 25 %)
2	Cash	$23,000
	Equity Investment (Norton Industries )		$23,000
	( $92,000 * 25 %)

With 25 % Riverbed has significant influence and should apply the equity method. No fair value adjustments are recoded under the equity method.