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Indigo Corp. is a medium-sized corporation specializing in constructing high end retail establishments. The company has long dominated the market on the west coast,
Indigo Corp. is a medium-sized corporation specializing in constructing high end retail establishments. The company has long dominated the market on the west coast, at one time achieving a 60% market penetration. During prosperous years, the company's profits, coupled with a conservative dividend policy, resulted in funds available for outside investment. Over the years, Indigo has had a policy of investing idle cash in equity securities. In particular, Indigo has made periodic investments in the company's principal supplier, Wildhorse Industries. Although the firm currently owns 14% of the outstanding common stock of Wildhorse Industries, Indigo does not have significant influence over the operations of Wildhorse Industries. Laura Hall has recently joined Indigo as assistant controller, and her first assignment is to prepare the 2025 year-end adjusting entries for the accounts that are valued by the "fair value" rule for financial reporting purposes. Hall has gathered the following information about Indigo's pertinent accounts. 1. Indigo has equity securities related to LA Mixture and Hollywood Hills. During this fiscal year, Indigo purchased 180,000 shares of LA Mixture for $3,060,000; these shares currently have a value of $3,240,000. Indigo's investment in Hollywood Hills has not been profitable; the company acquired 80,000 shares of Hollywood in April 2025 at $25 per share, a purchase that currently has a value of $1,520,000. 2. Prior to 2025, Indigo invested $36,670,000 in Wildhorse Industries and has not changed its holdings this year. This investment in Wildhorse Industries was valued at $35,160,000 on December 31, 2024. Indigo's 14% ownership of Wildhorse Industries has a current value of $37,740,000.
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