The following disclosure note appeared in the December 31, 2016, annual report of the Intel Corporation. 

Available-for-sale investments as of December 31, 2016, and December 26, 2015, were as follows: 

Intel also indicates the following: “During 2016, we sold available-for-sale investments for proceeds of $4.1 billion. . . . The gross realized gains on sales of available-for-sale investments were $530 million in 2016. Intel’s Note 16 (Other Comprehensive Income) indicates unrealized holding gains of $1,170 million during 2016, and a reclassification adjustment of $530 for gains that had previously been included in OCI and recorded in the fair value adjustment but which were now being included in net income after being realized upon sale. 

Required: 

1. Draw a T-account that shows the change between the December 26, 2015, and December 31, 2016, balances for the fair value adjustment associated with Intel’s AFS investments for 2016. By how much did the fair value adjustment change during 2016? 

2. Prepare a journal entry that records any unrealized holding gains and losses that occurred during 2016. Ignore income taxes. 

3. Prepare a journal entry that records any reclassification adjustment for available-for-sale investments sold during 2016. Ignore income taxes. 

4. Using your journal entries from requirements 2 and 3, adjust your T-account from requirement 1. Have you accounted for the entire change in the fair value adjustment that occurred during 2016? Speculate as to the cause of any difference.

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December 31, 2016 December 26, 2015 Gross Gross Gross Gross Adjusted Unrealized Unrealized Gains Adjusted Unrealized Unrealized Fair Fair ($ in millions) Cost Gains Losses Value Cost Losses Value $ 3.847 $ 3,837 $ 4,169 Corporate debt Financial institution instruments $(14) (11) (8) $ 4,161 24 6,098 2$ 3 $(11) 5 6,092 11,140 1 (2) (1) 11,139 Government debt 1,581 1,573 748 747 Marketable equity securities 2,818 3,363 (1) 6,180 3,254 2,706 5,960 Total available-for-sale investments $14,344 $3,372 $(34) $17,682 $19,311 $2,710 $(14) $22,007