Question

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys equity securities as noncurrent investments. None of Ornamental's investments are large enough to exert significant influence on the investee. Ornamental's fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020. Mar. 31 Acquired Distribution Transformers Corporation common stock for $510,000. Sep. 1 Acquired $1,065,000 of American Instruments' common stock. Sep. 30 Received a $20,400 dividend on the Distribution Transformers common stock. tribution Transformers common stock for $546,000. Nov. 1 Purchased $1,510,000 of M&D Corporation common stock. Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: American Instruments common stock M&D Corporation common stock $1,004,000 $1,581,000 Required: 1. Prepare the appropriate journal entry for each transaction or event during 2021, as well as any adjusting entries necessary at year-end. 2. Indicate any amounts that Ornamental Insulation would report in its 2021 income statement, 2021 statement of comprehensive income, and 12/31/2021 balance sheet as a result of these investments. Include totals for net income, comprehensive income, and retained earnings as a result of these investments. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Indicate any amounts that Ornamental Insulation would report in its 2021 income statement, 2021 statement of comprehensive income, and 12/31/2021 balance sheet as a result of these investments. Include totals for net income, comprehensive income, and retained earnings as a result of these investments. 20,400 46,000 66,400 $ Income statement: Dividend revenue Gain on investments Net income Statement of comprehensive income: Net income Other comprehensive income Comprehensive income Balance sheet: Assets Current Assets $ 66,400 $ 66,400 $ Noncurrent Assets Investments in equity securities Add: Fair value adjustment Shareholders' Equity Retained earnings 2,575,000 10,000 $ 2,585,000 $ 66,400

Answer 1

Part 1

No	Date	General Journal	Debit	Credit
1	March 31, 2018	Investment in Distribution Transformers stock	510,000
		Cash		510,000
2	September 01, 2018	Investment in American Instruments bonds	1065000
		Cash		1065000
3	September 30, 2018	Cash	20400
		Dividend revenue		20100
4	October 02, 2018	Fair value adjustment	36000
		Unrealized holding gain - NI		36000
5	October 02, 2018	Cash	546000
		Investment in Distribution Transformers stock		510000
		Fair value adjustment		36000
6	November 01, 2018	Investment in M&D Corporation Stock	1510000
		Cash		1510000
7	December 31, 2018	Fair value adjustment (1581000-1510000)+(1004000-1065000)	10000
		Unrealized holding gain - NI		10000

Part 2

Income statement:
Dividend revenue		20400
Gain on investments		46000
Net income		66400
Statement of comprehensive income:
Net income		66400
Other comprehensive income		0
Comprehensive income		66400
Balance sheet:
Assets
Current assets
Dividend receivable		0
Other receivables		0
Noncurrent assets:
Investments in equity securities	2575000
Add: fair value adjustment	10000	2585000
Shareholders’ equity
Retained earnings		66400

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