chap 10

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. 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 $550,000 at face value.
Sep.		1		Acquired $1,125,000 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 $590,000.
Nov.		1		Purchased $1,550,000 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	$	1,060,000
M&D Corporation bonds	$	1,625,000

(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.

I need help with this line (yellow)

Income Statement:
Interest revenue (18200+32400+13000)		$75,000
Gain on sale of investment		40000
Net income		$115,000
Statement of Comprehensive Income:
Net income		$115,000
Other comprehensive income:
Reclassification adjustment	-40000
Unrealized holding gain (37000+18000)	50000	10000
Comprehensive Income		$125,000
Balance Sheet:
Assets
Current assets:
Cash		2675000
Interest receivable (32400+13000)		53000
Investments:
Securities available for sale (1080000+1560000)	2675000
Add: Fair value adjustment	10000	2685000
Shareholders' Equity:
Retained Earnings		$115,000
Accumulated other comprehensive income
Accumulated unrealized holding gain		10000