P$17\mathrm{.}8$B $($L$02,3)($Fair Value and Equity Methods$)$ Rodeo Corp. is a medium$-$sized corporation specializing in construct$-$ing 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$$s profits, coupled with a conservative dividend policy, resulted in funds available for outside investment. Over the years, Rodeo has had a policy of investing idle cash in equity securities$.$ In particular, Rodeo has made periodic investments in the company$$s principal supplier, Driveway Industries. Although the firm currently owns $14\%$ of the outstanding common stock of Driveway Industries, Rodeo does not have significant influence over the operations of Driveway Industries.Marcy Kringle has recently joined Rodeo as assistant controller, and her first assignment is to prepare the $2020$ year$-$end adjusting entries for the accounts that are valued by the $$fair value$$ rule for financial reporting purposes. Kringle has gathered the following information about Rodeo$$s pertinent accounts$\mathrm{.}1.$ Rodeo has equity securities related to LA Mixture and Hollywood Hills. During this fiscal year, Rodeo purchased $200,000$ shares of LA Mixture for $$3,460,000$; these shares currently have a value of $$3,600,000.$ Rodeo investment in HollywoodHills has not been profitable; the company acquired $80,000$ shares of Hollywood in April $2020$ at $$26$ per share, a purchase that currently has a value of $$1,520,000\mathrm{.}2.$ Prior to $2020,$ Rodeo invested $$36,600,000$ in Driveway Industries and has not changed its holdings this year. This invest$-$ment in Driveway Industries was valued at $$35,350,000$ on December $31,2019.$ Rodeo$$s $14\%$ ownership of Driveway In$-$dustries has a current value of $$37,625,000.$Instructions$($a$)$ Prepare the appropriate adjusting entries for Rodeo as of December $31,2020,$ to reflect the application of the $$fair value$$ rule for the equity securities described above.$($b$)$ For the equity securities presented above, describe how the results of the valuation a djustments made in $($a$)$ would be reflected in the body of Rodeo$$s $2020$ financial statements.$($c$)$ Prepare the entries for the Driveway investment, assuming that Rodeo owns $30\%$ of Driveway$$s shares. Driveway reported income of $$650,000$ in $2020$ and paid cash dividends of $$120,000.$