Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can I get help figuring out the cash amount to put into the income statement? Thanks! The following selected transactions relate to investment activities of

Can I get help figuring out the cash amount to put into the income statement? Thanks!

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. Ornamentals 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 $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
American Instruments bonds $ 1,336,000
M&D Corporation bonds $ 2,273,000

(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.

image text in transcribed

Complete this question by entering your answers in the tabs below. Required 1 Required 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. (Amounts to be deducted should be indicated with a minus sign.) Show less Income statement: Interest revenue Gain on investments >> $ 90,400 79,000 0 $ 169,400 Net income Statement of comprehensive income: Net income 169,400 0 $ 169,400 Comprehensive income Balance sheet: Assets Current Assets Interest receivable Cash 68,000 0 X 0 Investments Investment in bonds Add: Fair value adjustment Shareholders' Equity Retained earnings $ 3,580,000 29,000 $ 3,609,000 $ 169,400

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions

Question

What are some of the topics studied?

Answered: 1 week ago