Catherine Ltd. has an investment with an original cost of $400,000. The investment was accounted for using the cost method in 20X0, 20X1, and 20X2. This year, 20X3, the company must conform to new accounting standards and report the investment at fair value through OCI. Fair values were $390,000, $410,000, and $450,000 at the end of 20X0, 20X1, and 20X2, respectively. The investment had a fair value of $466,000 at the end of 20X3. The change is to be accounted for retrospectively with restatement of the prior-year’s statements. The company will record the change in 20X3, and then adjust the investment account to fair value at the end of 20X3.
The change affects the shareholders’ equity account, accumulated other comprehensive income—unrealized holding gains (a separate component of accumulated other comprehensive income), instead of retained earnings.

Required:
Prepare appropriate journal entries for this situation. The income tax rate is 25%.