Question

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.

Mar.		31		Acquired 8% Distribution Transformers Corporation bonds costing $480,000 at face value.
Sep.		1		Acquired $1,140,000 of American Instruments' 10% bonds at face value.
Sep.		30		Received semiannual interest payment on the Distribution Transformers bonds.
Oct.		2		Sold the Distribution Transformers bonds for $545,000.
Nov.		1		Purchased $1,800,000 of M&D 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 bonds	$	1,098,000
M&D Corporation bonds	$	1,868,000

(Hint: Interest must be accrued.)

Required:
1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end.
2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.

Credit No 1 Date March 31, 2018 General Journal Investment in Distribution Transformers bonds Cash Debit 480,000 480,000 September 01, 2 Investment in American Instruments bonds 1,140,000 2018 Cash 1,140,000 - 3 September 30, 2018 Cash 19,200 Interest revenue 19,200 4 65,000 October 02, 2018 Fair value adjustment Unrealized holding gain—NI 65,000 5 545,000 October 02, 2018 Cash Investment in Distribution Transformers bonds Fair value adjustment 480,000 65,000 November 01, 2018 Investment in M&D Corporation bonds 1,800,000 Cash 1,800,000 December 31, 2018 Interest receivable 38,000 Interest revenue 38,000 December 31, 2018 Interest receivable 18,000 Interest revenue 18,000 December 31, 2018 26,000 Fair value adjustment Unrealized holding gain—NI 26,000

****** NEED HELP WITH THE 2ND PART (TRADING SECURITIES - AMORTIZED COST & RETAINED EARNINGS) *******

Answer 1

Investments
Trading securities - amortized cost	2940000
Add: Fair value adjustment	26000	2966000
Shareholders' Equity
Retained earnings		166200