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. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.

(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.
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.

Mar.		31		Acquired 8% Distribution Transformers Corporation bonds costing $560,000 at face value.
Sep.		1		Acquired $1,380,000 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 $610,000.
Nov.		1		Purchased $2,200,000 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:

Required 1 Required 2 Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, comprehensive income, and 12/31/2018 balance sheet as a result of these investments. (Amo indicated with a minus sign.) Income statement Interest revenue Unrealized holding los Net income Statement of comprehensive income Net income Other comprehensive income Comprehensive income Balance sheet: Assets Current Assets Interest receivable Investments Trading securities - amortized cost Add: Fair value adjustment Shareholders\' Equity Retained earnings Required! Required 2

Solution

Jounral:

Income statement and balance sheet amounts:

no effect on other comprehensive income.

workings:

Date	Account	Debit	Credit
Mar.31	Investment in transformers corporation	5,60,000
	Bank		5,60,000
	[Trading securities purchased]
Nov.1	Investment in M&D corporation	22,00,000
	Bank		22,00,000
	[Trading securities purchased]
Sep.1	Investment in American instruments	13,80,000
	Bank
	[Trading securities purchased]
Sep.30	Cash	22,400
	Interest revenue		22,400
Oct.2	Cash	6,10,000
	Investment in transformers corporation		5,60,000
	Gain on sale of trading securities		50,000
Dec.31	Interest receivable	68,000
	Interest revenue		68,000
	[ interest receivable on M&D and AI]
Dec.31	Unrealised holding gain on trading securites allowance	73,000
	Unrealised holding gain on M&D bonds		73,000
	Unrealised holding loss on trading securites allowance		44,000
	Unrealised holding loss on American instruments	44,000