Chapter 12, Problem 12.18E

Equity investments; fair value through net income

• LO12-4

The investments of Harlon Enterprises included the following cost and fair value amounts ($ in millions):

Harlon accounts for its equity investment portfolio at fair value through net income. Harlon sold its holdings of A Corporation shares on June 1, 2019, for $15 million. On September 12, it purchased the C Corporation shares.

Required:

1. What is the effect of the sale of the A Corporation shares and the purchase of the C Corporation shares on Harlon’s 2019 pretax earnings?

2. At what amount should Harlon’s securities equity investment portfolio be reported in its 2019 balance sheet?