The following selected transactions relate to investment act

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. Omamental\'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 $570,000 at face value. Sep. 1 Acquired $1,410,000 of American Instruments· 10% bonds at face value. Sep· 30 Received Oct. 2 Sold the Distribution Transformers bonds for $625,800 Nov. 1 Purchased $2,2se,000 of M&D; Corporation 6% bonds at face value. Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The narket prices of the investments are: semiannual interest paynent on the Distribution Transformers bonds. $1,367,0e0 $2,327,eee M&D; Corporation bonds Hint: Interest must be accrued.) Required: 2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensve 1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end. income, and 12/31/2018 balance sheet as a result of these investments. Complete this question by entering your answers in the tabs below. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end. (If no entry is required for a transaction/event, select \"No journal entry required\" in the first account field.)

Solution

Solution:-

Fair Value Adjustment (Refer Note 1)

Net unrealized holding gains and loss - OCI

$34000

$34000

Note 1:-

2. INCOME STATEMENT:-

Investment Revenue ( $22,800 + $47000) $69,800

Gain on sale of investments $69,800

Statement of comprehensive income:-

Net unrealized holding gains ($77000 - $43,000) $34,000

Balance sheet (Current Assets):-

Investment Revenue Receivable $47,000

Security available for sale $3,660,000

Plus:- Fair Value Adjustment $34,000 $3,694,000

Shareholders Equity:-

Net unrealized holding gains - $34,000

Date	Journal Entries	Debit	Credit
March 31	Investment in Distribution Transformers Shares	$570,000
	Cash		$570,000
September 1	Investment in American Instruments Bonds	$1,410,000
	Cash		$1,410,000
September 30	Cash (570,000 ×8% × 6/12)	$22800
	Interest Income		$22,800
October 2	cash	$625,000
	Investment in Distribution Transformers		$570,000
	Gain on sale of investments		$55,000
November 1	Investment Revenue Receivable	$47,000
	Investment Revenue (1,410,000 × 10% × 4/12)		$47,000
	Fair Value Adjustment (Refer Note 1) Net unrealized holding gains and loss - OCI	$34000	$34000