Chapter 16, Problem 16.4P

Equity Investments, Readily Determinable Fair Value. DeNault Aircraft Corporation acquired the following equity investments at the beginning of Year 1 to be held in a portfolio. DeNault does not have significant influence over the investees.

Description	Revere Group	Belton Brothers	Yan-Co Associates	Lopes Company
Number of shares	100,100	98,000	45,000	69,500
Market price per share	× $23	× $11	× $16	× $68
Share acquisition price	$2,302,300	$1,078,000	$720,000	$4,726,000

Share prices at the end of Years 1 and 2 follow.

Fair Value	Revere Group	Belton Brothers	Yan-Co Associates	Lopes Company
End of Year 1	$26	$9	$21	$59
End of Year 2	$18	$6	$25	$51

Required

1. a. Prepare the journal entry to record the acquisition of the investments.
2. b. Prepare the journal entry to record the end of Year 1 fair value adjustment for the portfolio.
3. c. Assume that DeNault sells 35,000 Yan-Co shares for $23 per share at the beginning of Year 2. Prepare the journal entry required to record the sale. DeNault does not adjust the fair value adjustment account at this time.
4. d. Prepare the journal entry to record the Year 2 fair value adjustment.