Illinois Exchange Company completed the following long-term investment transactions during 2021: 

At year-end, the fair value of the Amsterdam stock is $30,900. The fair value of the Exeter stock is $652,000. 

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 Illinois Exchange would report on its year-end balance sheet and income statement for these investment transactions. It is helpful to use a T-account for the Equitymethod Investment account. Ignore income tax.

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2021 May 12 Jul 9 Sep 16 Oct 30 Dec 31 Purchased 21,000 shares, which make up 45% of the common stock of Exeter Corporation at total cost of $340,000. Received annual cash dividend of $1.21 per share on Exeter investment. Purchased 1,100 shares of Amsterdam, Inc., common stock (less than 5% of its outstanding stock) paying $42.25 per share. Received cash dividend of $0.34 per share on the Amsterdam investment. Received annual report from Exeter Corporation. Net income for the year was $580,000.