On January 1, 2014, Allan acquires 15 percent of Bellevues outstanding common stock for $85,800. Allan classifies the investment as an available-for-sale security and records any unrealized holding gains or losses directly in owners equity. On January 1, 2015, Allan buys an additional 10 percent of Bellevue for $60,930, providing Allan the ability to significantly influence Bellevues decisions.

During the next two years, the following information is available for Bellevue:

	Income	Dividends	Common Stock Fair Value (12/31)
2014	$ 135,000	$85,000	$595,000
2015	163,800	99,400	638,200

In each purchase, Allan attributes any excess of cost over book value to Bellevues franchise agreements that had a remaining life of 10 years at January 1, 2014. Also at January 1, 2014, Bellevue reports a net book value of $292,000.

a.	Assume Allan applies the equity method to its Investment in Bellevue account:

1.	On Allans December 31, 2015, balance sheet, what amount is reported for the Investment in Bellevue account?

Investment in Bellevue

2.	What amount of equity income should Allan report for 2015?

Equity Income

3.

Prepare the January 1, 2015, journal entry to retrospectively adjust the Investment in Bellevue account to the equity method. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) a. Record the eliminate AFS fair value adjustment account balances for the investment in Bellevue. b. Record the retrospective adjustment.