Chapter 17 Case 2 Warner Bros. carries an account in its general ledger called investments, which contain the following debits for investment purchases and no credits. March 1, 2021 Bugs common stock, $50 par, 500 shares. July 1, 2021 U.S. government bonds, 5% due June 30, 2026, interest payable July 1 and January 1, 50 bonds of $1,000 par each. $61,000 $50,000 October 1, 2021 Daffy Company 8% bonds, par $100,000, dated July 1, $102,000 2021, purchased at par plus accrued interest, interest payable annually on July 1, due July 1, 2031. Instructions: a. Journal Entries Assuming that Bugs common stock is classified as trading, and the bonds are both classified as available-for-sale, prepare the journal entry necessary to re-classify the amounts into the proper accounts. Prepare the entry to record the accrued interest on December 31, 2021. b. Fair Value adjustments Bugs Common Stock $59,100 U.S. Government bonds $51,500 Daffy company bonds $104,200 Create a computer spreadsheet to calculate the fair value adjustments needed at December 31, 2021. c. Equity Method Accounting Assume that Warner Bros. investment in Bugs Common Stock represents 30% of Bugs shares. Bugs declared and paid dividends of $1,000 and reported net income of $8,000 for 2021. Prepare the entries that Warner would make in 2021 related to the Bugs investment.