Ec#1.3

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 $580,000 at face value.
Sep.		1		Acquired $1,440,000 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 $640,000.
Nov.		1		Purchased $2,300,000 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	$	1,398,000
M&D Corporation bonds	$	2,378,000

(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.

Ec#2.3

At the beginning of the year, Lambert Motors issued the three notes described below. Interest is paid at year-end. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

1. The company issued a two-year, 10%, $730,000 note in exchange for a tract of land. The current market rate of interest is 10%.
2. Lambert acquired some office equipment with a fair value of $157,500 by issuing a one-year, $165,000 note. The stated interest on the note is 5%. The current market rate of interest is 10%.
3. The company purchased a building by issuing a two-year installment note. The note is to be repaid in equal installments of $1 million per year beginning one year hence. The current market rate of interest is 10%.

Required:

Prepare the journal entries to record each of the three transactions and the interest expense at the end of the first year for each. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in whole dollars.) Answer is complete but not entirely correct.

No	Transaction	General Journal	Debit	Credit
A	1a	Land	730,000
		Notes payables		730,000
B	1b	Interest expense
		Cash
C	2a	Office equipment
		Discount on notes payable
		Notes payable
D	2b	Interest expense
		Discount
		Cash
E	3a	Building
		Notes payable
F	3b	Interest expense
		Notes payable
		Cash