Question

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, not intending to profit from short-term differences in price and not necessarily to hold debt securities to maturity, but to have them available for sale when circumstances warrant. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.

Mar.		31		Acquired 6% Distribution Transformers Corporation bonds costing $460,000 at face value.
Sep.		1		Acquired $990,000 of American Instruments’ 8% bonds at face value.
Sep.		30		Received semiannual interest payment on the Distribution Transformers bonds.
Oct.		2		Sold the Distribution Transformers bonds for $491,000.
Nov.		1		Purchased $1,440,000 of M&D Corporation 4% bonds costing 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	$	934,000
M&D Corporation bonds	$	1,526,000

(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. For any sales, prepare entries to update the fair-value adjustment, record any reclassification adjustment, and record the sale.
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.

***** NEED JOURNAL ENTRY #5 *****

No Da Credit Date March 31, 2018 General Journal Investment in Distribution Transformers bonds Debit 460,000 Cash 460,000 12 September 01, 2018 Investment in American Instruments bonds 990,000 Cash 990,000 September 30, 2018 Cash 13,800 Interest revenue 13,800 31,000 October 02, 2018 Fair value adjustment Unrealized holding gain—OCI 31,000 5 October 02, 2018 No Transaction Recorded 6 491,000 October 02, 2018 Cash Investment in Distribution Transformers bonds Gain on sale of investments 460,000 31,000 November 01, 2018 1,440,000 Investment in M&D Corporation bonds Cash 1,440,000 December 31, 2018 Interest receivable 26,400 Interest revenue 26,400 9 December 31, 2018 Interest receivable 9,600 Interest revenue 9,600 10 December 31, 2018 30,000 Fair value adjustment Unrealized holding gain—OCI 30,000

****** NEED HELP WITH ALL OF PART 2 *******

Answer 1

NEED JOURNAL ENTRY #5

No	Date	Account titles and explanation	Debit	Credit
5.	October 02, 2018	Reclassification adjustment- OCI	$31000
		Fair value adjustment		$31000
		(To record reclassification adjustment)

NEED HELP WITH ALL OF PART 2

Income Statement:
Interest revenue (13800+26400+9600)		$49800
Gain on sale of investments		31000
		$80800
Statement of comprehensive income
Net income		$80800
Other comprehensive income
Reclassification adjustment- OCI	(31000)
Unrealized holding gain- OCI (31000+30000)	61000	30000
Comprehensive income		110800
Balance sheet:
Assets
Current assets
Interest receivable (26400+9600)		$36000
Investments
Securities available-for-sale (990000+1440000)	$2430000
ADD: Fair value adjustment	30000	$2460000
Shareholders' Equity
Retained earnings		80800
Accumulated other comprehensive income
Accumulated unrealized holding gains		30000