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 8% Distribution Transformers Corporation bonds costing $400,000 at face value. Sep. 1 Acquired $900,000 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 $425,000. Nov. 1 Purchased $1,400,000 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 American Instruments bonds M&D Corporation bonds $ 850,000 $1,460,000 (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

Answer 1

be fed onine in 700, there is no spe a rtsponsibes of t d put in SA 700. H My paragraphs fro Jownal Fntries fo during 2021 Date Mas, 31 that these respecty ed for gvicg obsery 308 85 the case my Deb71s Cndil (8) Amoun Partienlars 8% DTG Bond Alc Ampunt urts depict a true/ on the otal onformat pescrbed form, es 000-in cash. Wh Budter may hay To Cash Ale. dust of a statutory 400, 000 (au'ng 81. 0TC Bond Puschasedlt face Valne) 400,006 Sp1. 10% Americal Irstrument Bond Ale-& To Cash Atc (3ing 10Y. A. Instrument bond Pudchand at face Valne) 900,000 900,006 Sep30 Cash Atc To Inturest Recived AC Semi amnually intrest, 400,000 A87.46/12 16000 16000 A - 16000 iceirod for the period from Aprit 1 to sep. 30) Oct 2. Bank Ac To 8% DTG Bond A1G To Capital Protit Ala 40,00 25000 (81.010 Bond sold at he'ghes Priee and Capitab Ps otil genes ated) NOn, 6% M2D Cor poration Bond Aole To Cash Alc (aaing 6Y. M&0 Corporation Bond pu chand af face Vaute) . 1400,00 ty1400, C00 Dee-31, Aceured înterest Alc To Intrest Earned Ale. (Being Intereston 10% Americal Instrument for 3monthe acenued for the period) go0,000 x10% 3/12. 22500 22500 Dec 31 Aeeruud Înterest Alc To Interest Earmed AfC. (9ing Fnterest Ehed on 6% MlD Corporatron lon amonths aeerued (1400,000 X6% 12/12) 14000 14000

ategory of Income Stati ment ot Ornamental Insulation diring 2021 ( Fntracts) -19 doled 2 కCC 4. Tnterest farned 1160061 225 00 114000) Statement of Comprehensive Intome during 2021 (Entracts) (8) ంారాం 8 Protit on Sale of Investment Balanco Sheet ob- Ornamental Insalation duri ng do24 ( Pxtracts) Note L LAWS (3) 23 00, 600 1, Alon Curent Invertment he preso the repo (1) 900, 000 1400.000 2300,000 Notes to Aecocmt 10Y. Americah Instrument Bond 2 67. M&D Corporation Bond In the n who o or profes erson a), be in 3CB * Imppotant points are re 1, Tnvestment are held tor hong run and notintened to profit tore shont termi diferences, S0, the Markel Valne of Pnvestment are not considered at the yeas end - parts. bing hether se of ofit or tcounti ars req 2. It is assumel that interes t eurned and, aceerued for spectie retai ned period. ed part ons, if nancia brm No 3, Protit one Sale of Investment, nhichr are not bed intended to protit for short teren di tferenee are not taken as Ruenue Pr otit, so it cann't be ow Pincome statement. It is in Capital natwre and appearid ow Comprehensive In come Statment. uditon logy 013. e infor buntin the s nd i ie kep je asp pect