Problem - On January 1, 2010, Allan acquires 15 percent of Bellevue's outstanding common stock for $62,000. 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, 2011, Allan buys an additional 10 percent of Bellevue for $43,800, providing Allan the ability to significantly influence Bellevue's decisions.

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

Income Dividends Common Stock

Fair Value (12/31)

2010 $ 80,000 $30,000 $438,000

2011 100,000 40,000 468,000

In each purchase, Allan attributes any excess of cost over book value to Bellevue's franchise agreements that had a remaining life of 10 years at January 1, 2010. Also at January 1, Bellevue reports a net book value of $280,000.

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

(a-1) On Allan's December 31, 2011, balance sheet, what amount is reported for the Investment in Bellevue account?

(a-2) What amount of equity income should Allan report for 2011? (Omit the "$" sign in your response.)

(a-3) Prepare the January 1, 2011, journal entry to retrospectively adjust the Investment in Bellevue account to the equity method.

Assume Allan elects the fair-value reporting option for its investment in Belllevue:

(b-1) On Allan's December 31, 2011, balance sheet, what amount is reported for the Investment in Bellevue account?

(b-2) What amount of income from its investment in Bellevue should Allan report for 2011?