Indiana Exchange Company completed the following long-term investment transactions during 2014:

2014

May 12 Purchased 21,000 shares, which make up 45% of the common stock of Portland Corporation at total cost of $370,000.

Jul 9 Received annual cash dividend of $1.28 per share on the Portland investment.

Sep 16Purchased 1,100 shares of Sydney, Inc., common stock as an available-for-sale investment, paying $41.75 per share.

Oct 30 Received cash dividend of $0.36 per share on the Sydney investment.

Dec 31 Received annual report from Portland Corporation. Net income for the year was $465,000.

At year-end, the fair value of the Sydney stock is $31,600. The fair value of the Portland stock is $653,000.

Requirements

1. For which investment is fair value used in the accounting? Why is fair value used for one investment and not the other?

2. Show what Indiana Exchange would report on its year-end balance sheet, income statement, and statement of other comprehensive income for these investment transactions. It is helpful to use a T-account for the Equity-method Investment account. Ignore income tax.