Question

The following selected transactions relate to lInvestment activitles of Omamental Insulation Corporation during 2018. The buys debt securtes, intending to profit from short-term differences In price and maintalning them in an active mental's fiscal year ends on December 31. No Investments were held by Ornamental on December 31, 2017 trading portfollo. Mar. 31 Acquired as Distribution Transformers Corporation bonds costing $400,000 at face value. Sep. 1 Acquired $988,e00 of Ameri can Instrunents 1e8 bonds at face value. seniannual interest paynent on the Distribution Transforners bonds Oct. 2 Sold the Distribution Transformers bonds for $425,eee . 1 Purchased $1,400,eee of HSD Corporation 6% bonds at face value Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: American Instruments bands s 8s6,e8e $1,46e,eee M&D Carporation bonds Hint Interest must be accrued.) Required 1 Prepare the appropriate journal entry for each trencaction or event during 2018, as well as any adjusting entries necessary at year end. 2 Indicate any amounts that Ornamentai Insulation would report in its 2018 Income statement, 2018 statement of comprehensive income. and 12/31/2018 balance sheet as a result of these invastments Complete this question by entering your answers in the tabs below. Required 1Required 2 Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end f no entry is required for a transaction/event select No journal entry required in the first account feld.)

Answer 1

Date	Accounts Title	Dr	Cr
31-Mar	Investment in Bonds	$400,000
	Cash		$400,000
1-Sep	Investment in Bonds	$900,000
	Cash		$900,000
30-Sep	Cash	16000
	Interest revenue (400000*4%)		16000
2-Oct	Cash	425000
	Gain on sale of Investment		25000
	Investment in Bonds		400000
1-Nov	Investment in Bonds	$1,400,000
	Cash		$1,400,000
31-Dec	Interest receivable	44000
	Interest revenue (900000*10%*4/12)+ (1400000*6%*2/12)		44000
31-Dec	Fair Value Adjustment	10000
	Unrealized gain on investment in bonds		10000
	(850,000+1460,000)-(900,000+1400000)
	Income Statement
	Other Revenue and Gain
	Interest Revenue		60000
	Gain on sale of Investment		25000
	Total		85000
	Statement of Comprehensive Income
	Unrealized gain on investment in bonds		10000
	Balance Sheet
	Assets
	Current Assets
	Interest receivable		44000
	Investments
	Investment in Bonds	2300000
	Add: fair value Adjustment	40000	2340000
	Shareholder Equity
	Other Comprehensive Income		40000

JOURNAL OF LANCE BROTHERS

DATE	Account	DEBIT	CREDIT
1 JULY 2018	Bonds investment discount on bonds investments cash	720000	120000 600000
31 dec 2018	cash discount on bonds interest revenue	10800 12000	22800

face value= 720000 @ 3% interest

effect market rate=4% per annum

Payment made =600000

discount on investment =720000-600000=120000

DISCOUNT AMORTIZATION AND INTEREST TABLE

A	B	C	D	E	F	G
DATE	INTEREST PAYMENT 3%	INTEREST EXPENSES	AMORATIZATION BOND DISCOUNT(C-B)	DEBIT BALANCE ACCOUNT B	CREDIT BALANCE ACCOUNT	BOOK VALUE OF BONDS
31 JULY 2018				120000	720000	600000
31 DEC 2018	10800	12000	1200	118800	720000	601200