Data for investments in stock classified as trading securities are presented in E12-6. Assume instead that the investments are classified as available-for-sale securities with the same cost and fair value data. The securities are considered to be a long-term investment.

\section*{Instructions}

(a) Prepare the adjusting entry at December 31,1998 , to report the securities at fair value.

(b) Show the statement presentation at December 31, 1998, after adjustment to fair value.

(c) J. Arnet, a member of the board of directors, does not understand the reporting of the unrealized gains or losses. Write a letter to Mr. Arnet explaining the reporting and the purposes it serves.