The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. 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, 2020.
Mar. | 31 | Acquired 8% Distribution Transformers Corporation bonds costing $580,000 at face value. | ||
Sep. | 1 | Acquired $1,440,000 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 $640,000. | ||
Nov. | 1 | Purchased $2,300,000 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 | $ | 1,398,000 | |
M&D Corporation bonds | $ | 2,378,000 | |
(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.
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.
a) | ||||
Date | Account Title | Debit | Credit | |
2018 | ||||
Mar.31 | Investment in Distribution Transformers shares | $ 580,000.00 | ||
Cash | $ 580,000.00 | |||
Sept.1 | Investment in American Instruments bonds | $1,440,000.00 | ||
Cash | $1,440,000.00 | |||
Sept.30 | Cash ($580,000 x 8%/2) | $ 23,200.00 | ||
Investment revenue | $ 23,200.00 | |||
Oct.2 | Cash | $ 640,000.00 | ||
Investment in Distribution Transformers | $ 580,000.00 | |||
Gain on sale of investments | $ 60,000.00 | |||
Nov.1 | Investment in M&D Corporation shares | $2,300,000.00 | ||
Cash | $2,300,000.00 | |||
Dec.31 | Investment revenue receivable | $ 48,000.00 | ||
Investment revenue ($1440000 x 10% x 4/12) | $ 48,000.00 | |||
Dec.31 | Investment revenue receivable | $ 23,000.00 | ||
Investment revenue ($2300000 x 6% x 2/12) | $ 23,000.00 | |||
Dec.31 | Fair value adjustment (calculated below) | $ 36,000.00 | ||
Net unrealized holding gains and losses–OCI | $ 36,000.00 | |||
Available for sale securities | Cost | Fair market Value | Profit/Loss | |
M & D Corporation shares | $2,300,000.00 | $2,378,000.00 | $ 78,000.00 | |
American Instruments bonds | $1,440,000.00 | $1,398,000.00 | $(42,000.00) | |
Totals | $3,740,000.00 | $3,776,000.00 | $ 36,000.00 | |
b) | ||||
Income Statement | ||||
Investment Revenue = $23200 + $48000 + 23000 | $ 94,200.00 | |||
Gain on sale of investments | $ 60,000.00 | |||
Statement of comprehensive income | ||||
Net unrealized holding gains and losses on investments | $ 36,000.00 | |||
Balance sheet: | ||||
Current Assets | ||||
Investment revenue receivable | $ 48,000.00 | |||
Securities available-for-sale | $3,740,000.00 | |||
Add: Fair value adjustment | $ 36,000.00 | $3,776,000.00 | ||
Shareholders’ Equity | ||||
Net unrealized holding gains and losses on investments | $ 36,000.00 | |||
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company...
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 $560,000 at face value. Sep....
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 $540,000 at face value. Sep. 1 Acquired $1,320,000 of American Instruments' 10% bonds at face value Sep. 30 Received...
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 84 Distribution Transformers Corporation bonds costing $400,000 at face value. Sep....
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....
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys equity securities as 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, 2017. Mar. 31 Acquired Distribution Transformers Corporation common stock for $590,000 Sep. Acquired $1,185,000 of American Instruments' common stock Sep. 30 Received a $20,650 dividend on the Distribution Transformers...
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. 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, 2020. Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $430,000 at face value. Sep. 1 Acquired $990,000 of American Instruments' 10% bonds at face value. Sep. 30 Received...
Please answer... 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 84 Distribution Transformers Corporation bonds costing $400,000 at face...
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 $430,000 at face value Sep. 1 Acquired...
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...
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. 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, 2020. Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $400,000 at face value. Sep Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds. 1 Acquired $900,000...