Securities available-forsale; fair value adjustment
Response to the following problem:
The investments of Harlon Enterprises included the following cost and fair value amounts:
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($ in millions)
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Fair Value, Doc. 31
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Securities Available-for-Sale
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Cost
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2016
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2017
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A Corporation shares
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$ 20
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$14
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na
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|
B Corporation bonds
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35
|
35
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$ 37
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|
C Corporation shares
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15
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na
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14
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D Industries shares
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45
|
46
|
50
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Totals
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$115
|
$95
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$101
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Harlon Enterprises sold its holdings of A Corporation shares on June 1, 2017, for $15 million. On September 12, 2017, it purchased the C Corporation shares.
Required:
1. What is the effect of the sale of the A Corporation shares and the purchase of the C Corporation shares on Harlon's 2017 pretax earnings?
2. At what amount should Harlon's securities available-for-sale portfolio be reported in its 2017 balance sheet? What adjusting entry is needed to accomplish this? What is the effect of the adjustment on Harlon's 2017 pretax earnings?