P17-8 (a & c) (Fair Value and Equity Methods) Brooks 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, Brooks has had a policy of investing idle cash in equity securities. In particular, Brooks has made periodic investments in the company's principal supplier, Norton Industries. Although the firm currently owns 12% of the outstanding common stock of Norton Industries, Brooks does not have significant influence over the operations of Norton Industries. Cheryl Thomas has recently joined Brooks as assistant controller, and her first assignment is to prepare the 2010 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 Brooks' pertinent accounts. Brooks has trading securities related to Delaney Motors and Patrick Electric. During this fiscal year, Brooks purchased 100,000 shares of Delaney Motors for $1,400,000; these shares currently have a market value of $1,600,000. Brooks' investment in Patrick Electric has not been profitable; the company acquired 50,000 shares of Patrick in April 2010 at $20 per share, a purchase that currently has a value of $720,000. Prior to 2010, Brooks invested $22,500,000 in Norton Industries and has not changed its holdings this year. This investment in Norton Industries was valued at $21,500,000 on December 31, 2009. Brooks' 12% ownership of Norton Industries has a current market value of $22,225,000. Prepare the appropriate adjusting entries for Brooks as of December 31, 2010, to reflect the application of the fair value rule for both classes of securities described above. Description/Account Debit Credit Unrealized Holding Gain or Loss-IncomeInvestment in Norton IndustriesSec. Fair Value Adjust.(Avail.-for-Sale)Sec. Fair Value Adjust.(Trading)Unrealized Holding Gain or Loss-EquityInvestment RevenueCash Unrealized Holding Gain or Loss-EquitySec. Fair Value Adjust.(Trading)Investment RevenueInvestment in Norton IndustriesUnrealized Holding Gain or Loss-IncomeCashSec. Fair Value Adjust.(Avail.-for-Sale) (Investment in trading securities.) Investment in Norton IndustriesUnrealized Holding Gain or Loss-EquityInvestment RevenueUnrealized Holding Gain or Loss-IncomeCashSec. Fair Value Adjust.(Trading)Sec. Fair Value Adjust.(Avail.-for-Sale) Unrealized Holding Gain or Loss-EquityUnrealized Holding Gain or Loss-IncomeSec. Fair Value Adjust.(Avail.-for-Sale)Investment in Norton IndustriesInvestment RevenueCash (Investment in available-for-sale securities.) Prepare the entries for the Norton investment, assuming that Brooks owns 25% of Norton's shares. Norton reported income of $500,000 in 2010 and paid cash dividends of $100,000. Description/Account Debit Credit Unrealized Holding Gain or Loss-EquityInvestment in Norton IndustriesUnrealized Holding Gain or Loss-IncomeSec. Fair Value Adjust.(Avail.-for-Sale)Investment RevenueSec. Fair Value Adjust.(Trading) Investment RevenueUnrealized Holding Gain or Loss-EquitySec. Fair Value Adjust.(Trading)Investment in Norton IndustriesUnrealized Holding Gain or Loss-IncomeSec. Fair Value Adjust.(Avail.-for-Sale) Cash Investment in Norton IndustriesUnrealized Holding Gain or Loss-IncomeUnrealized Holding Gain or Loss-EquitySec. Fair Value Adjust.(Avail.-for-Sale)Investment RevenueSec. Fair Value Adjust.(Trading)