On December 31, 1997, Karen Associates owned the following securities that are held as long-term investments. The securities are not held for influence or control over the investee.

On this date the total fair value of the securities was equal to its cost. In 1998 these transactions occurred:

\section*{Instructions}

(a) Journalize the 1998 transactions and post to the account Stock Investments. (Use the \(\mathrm{T}\) account form.)

(b) Prepare the adjusting entry at December 31, 1998, to show the securities at fair value. The stock should be classified as available-for-sale securities.

(c) Show the balance sheet presentation of the investments and the unrealized gain (loss) at December 31, 1998. At this date Karen Associates has common stock \(\$ 1,500,000\) and retained earnings \(\$ 1,000,000\).

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Common Stock Shares Cost X Co. 2,000 $90,000 Y Co. 5,000 45,000 Z Co. 2,000 30,000