Question

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. 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 in years when circumstances warrant. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020.

Mar.		31		Acquired 6% Distribution Transformers Corporation bonds costing $500,000 at face value.
Sep.		1		Acquired $1,050,000 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 $535,000.
Nov.		1		Purchased $1,500,000 of M&D Corporation 4% 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	$	990,000
M&D Corporation bonds	$	1,570,000

(Hint: Interest must be accrued.)

Required:
1. Prepare the appropriate journal entry for each transaction or event during 2021, 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 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

Prepare the appropriate journal entry for each transaction or event during 2021, 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

• Record the acquisition of 6% Distribution Transformers Corporation bonds costing $500,000 at face value.

Note: Enter debits before credits.

	Date General Journal Debit Credit March 31, 2021

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. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Jo sap at wou From the desk of Unsealsed (gain) $600oo. Moss on amesicas instument $60000 Investment in american instument cRecord change in fair value) Snuestment in MAD $70000 Unsealised gain $70000 on investment

From the case of $15000 $35000 $ 50000 Income statement Interest income Realised gain - Neb income Statement of comprehensive income. Gain on four value. C $70080- $60000) Other comprehensive income comprchensive income Balance sheet Non Current Arlet Investment in M&D Investment in American $100009 $10000 $600 oo $1570000 $990000 Shaxholder equity Retained eaming ОСТ $ 50000 $10000 Oddy

From the desk or DATE 1) Investment in distribution bansform Bank $ 500ovo $ 500000 Investment in American Prosument Bank $1050,000 $10.50000 3) 900 - 4 Bank to $15000 Interest income $1svoo (500000X 6% XY Cash. $ 4535000. To Realised gain on sale. I Investment in $500000 distributospansfer Investment in $1500000 med Corporation $ 1 500000 Bank $35000 Oddy