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 $480,000. Sep. 1 Acquired $1,020,000 of American Instruments' common stock. Sep. 30 Received a $19, 200 dividend on the Distribution Transformers common stock. Oct. 2 Sold the Distribution Transformers common stock for $513,000. Nov. 1 Purchased $1,480,000 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 $ 962,000 $1,548,000 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.

Answer 1

Credit ($) Debit ($) - Date 480.000 - 2024 480,000 March 31st T General Journal 1 Irrestment in distribution - Transformers stock Cash Investment in American Instruments stock 1020,000 1020.000 Cash 513,000 Oct and Sept 30th Cash 19,200 19200 Dindend revenue Oct and Cash Investment in distribution 480,000 transformers stock 33.000 Fair value adjustment Fair value adjustment 33000 unrealised holding gain 33.000 Nourist Investment in M& Deorporation 1,480,000 1480,000 Cash Fair value adjustment (Notei) 10,000 unrealized holding gain 10,000 Note De American instrumenti common stock - 962,000 - 1020000 >>($58,000) dou. M&D Corporation Common stock >> 1,548000 - 1480,000 >$68,000 profito Fair value adjustment $68,000 + ($58000) = $10,000 profit

Amount ($) 19,200 133,000 5 2,200 Income statement Dirndend ecevenue unrealised holding gain on investments and sold Income statement totals (A) Other Comprehensive income. uncealised gain on investment held Total of other comprehensive incomes (B Net Income 10,000 10,000 $62,200 Amount ($) S 962oool 1548000 Balance sheet. Assets urrent Assets Investments - homot in American instruments common stock Arant in MED Corporation common stork Total investments Liabilities & hareholders equitys- shareholders equity 2510cool 10,000 10000