Brooks Corp. is a medium sized corporation specializing in quarrying stone for building construction. The company has long dominated the market, at one time achieving a 70% market penetration. During prosperous years, the companys profits, coupled with conservative dividend policy, resulted in funds available for outside investment. Over the years, Brooks had a policy of investing idle cash in equity securities. In particular Brooks has made periodic investments in the companys principal supplier, Norton Industries. Brooks does not have significant influence over the operations of Norton Industries.

Cheryl Thomas has recently joined Brooks as assistant controller, and her first assignment is to prepare the 2014 year-end adjusting entries for the accounts that are valued by Fair Value rule for financial reporting purposes. Thomas has gathered the following information about Brooks accounts.

1) Brooks has trading securities related to Delaney Motors and Patrick Electric. During the fiscal year, Brooks purchased 100,000 shares of Delaney Motors for $1,400,000; These shares currently have a fair value of $1,600,000. Brooks investment in Patrick has not been profitable and the company is looking for ways to disinvest; The Company acquired 50,000 shares of Patrick in April 2014 at $20 per share, a purchase that has a value of $720,000.

2) Prior to 2014, Brooks invested $22,500,000 in Norton Industries and has not changed its holdings this year. The investment in Norton was valued at $21,500,000 on December 31, 2013. Brookss 13% ownership in Norton has a current fair value of 22,2500,000.

Required:

(a) Prepare the appropriate adjusting entries for Brooks as of December 31, 2014 under the fair value method. (6 points)

(b) Prepare the entries for the Norton Investment, assuming that Brooks owns 25% of Nortons shares. Norton reported income of $500,000 in 2014 and paid cash dividends of $100,000. ( 6 Points)