Perez Company began operations in 2017. Since then, it has reported the following gains and losses for its equity investments in on the income statement:

2017 2018 2019

Gains (losses) from sale of securities $15,000 $(20,000) $ 14,000

Unrealized holding losses on valuation of securities (30,000) (15,000)

Unrealized holding gain on valuation of securities 10,000

At January 1, 2020, Perez owned the following securities:

Cost

BKD Common (15,000 shares @ $30) $450,000

LRF Preferred (2,000 shares @ $105) 210,000

During 2020, the following events occurred:

1. Sold 5,000 shares of BKD for $170,000.

2. Acquired 1,000 shares of Horton Common for $40 per share. Brokerage commissions totaled $1,000.

At 12/31/20, the fair values for Perez's investments were:

BKD Common, $28 per share

LRF Preferred, $110 per share

Horton Common, $45 per share

Instructions

(a) Prepare a schedule which shows the balance in the Fair Value Adjustment account at December 31,

2019 (after the adjusting entry for 2019 is made).

(b) Prepare a schedule which shows the aggregate cost and fair values for Perez's securities portfolio at

12/31/20.

(c) Prepare the necessary adjusting entry based upon your analysis in (b) above.