Question: E17.20 (LO 2, 4 ) (Fair Value Measurement Issues) Assume the same information as in E17.19 for Lilly Company. In addition, assume that the investment

E17.20 (LO2,4)(Fair Value Measurement Issues)Assume the same information as inE17.19for Lilly Company. In addition, assume that the investment in the Woods Inc. stock was sold during 2021 for $195,000. At December 31, 2021, the following information relates to its two remaining investments of common stock.

Cost

(at purchase date)

Fair Value

(at December 31)

Investment in Arroyo Company stock

$100,000

$140,000

Investment in Lee Corporation stock

250,000

310,000

Total

$350,000

$450,000

Net income before any security gains and losses for 2021 was $905,000.

Instructions

a.Compute the amount of net income or net loss that Lilly should report for 2021, taking into consideration Lilly's security transactions for 2021.

b.Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock at December 31, 2021.

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