Pronghorn Corp. is a medium$-$sized corporation specializing in quarrying stone for building construction. The company has long

dominated the market, at one time achieving a $70\%$ 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, Pronghorn has had a policy of

investing idle cash in equity securities$.$ In particular, Pronghorn has made periodic investments in the company's principal vendor of

mining equipment, Norton Industries. Although the firm currently owns $12\%$ of the outstanding common stock of Norton Industries,

Pronghorn does not have significant influence over the operations of Norton Industries.

Cheryl Thomas has recently joined Pronghorn as assistant controller, and her first assignment is to prepare the December $31,2025$

year$-$end adjusting entries for the accounts that are valued by the "fair value" rule for financial reporting purposes. Thomas has

gathered the following information about Pronghorn's pertinent accounts.

Pronghorn has equity securities related to Delaney Motors and Patrick Electric. During $2025,$ Pronghorn

purchased $91,000$ shares of Delaney Motors for $$1,456,000$; these shares currently have a fair value of $$1,632,000.$

Pronghorn' investment in Patrick Electric has not been profitable; the company acquired $52,000$ shares of Patrick in April

$2025$ at $$21$ per share, a purchase that currently has a value of $$753,000.$

Prior to $2025,$ Pronghorn invested $$22,309,000$ in Norton Industries and has not changed its holdings this year. This

investment in Norton Industries was valued at $$21,694,000$ on December $31,2024.$ Pronghorn' $12\%$ ownership of Norton

Industries has a current fair value of $$22,240,000$ on December $31,2025.$

$($a$)$

Your Answer

Correct Answer $($Used$)$

Your answer is partially correct.

Prepare the appropriate adjusting entries for Pronghorn as of December $31,2025,$ to reflect the application of the "fair value"

rule for the securities described above. $($List debit entry before credit entry. Credit account titles are automatically indented when

amount is entered. Do not indent manually. If no entry is required, select $"$No Entry" for the account titles and enter Ofor the amounts.$)$

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Solution

List of Accounts

$($c$)$

Your answer is incorrect.

Prepare the entries for the Norton investment, assuming that Pronghorn owns $25\%$ of Norton's shares. Norton reported income

of $$501,000$ in $2025$ and paid cash dividends of $$100,000.($List all debit entries before credit entries. Credit account titles are

automatically indented when amount is entered. Do not indent manually. If no entry is required, select $"$No Entry" for the account titles and

enter $0$ for the amounts.$)$