(L02,4) (Fair Value Measurement Issues) Assume the same information as in E17-19 for Lilly Company. In addition, assume that the investment in the Woods Inc. stock was sold during 2018 for $195,000. At December 31, 2018, the following information relates to its two remaining investments of common stock.

Cost Fair Value

(at purchase date) (at December 31)

Investment in Arroyo Company stock $100,000 $140,000 Investment in Lee Corporation stock 250,000 310,000 Total $350,000 $450,000 Net income before any security gains and losses for 2018 was $905,000.

Instructions

(a) Compute the amount of net income or net loss that Lilly should report for 2018, taking into consideration Lilly’s security transactions for 2018.

(b) Prepare the journal entry to record unrealized gain or loss related to the investment in Arroyo Company stock at December 31, 2018.